IMF airs concern over RP budget deficit

MANILA, Philippines - Multilateral lender International Monetary Fund (IMF) has expressed concern over the Philippine government’s budget deficit blowout.

A government official who requested anonymity said the concern was raised during a meeting between visiting IMF officials and fiscal as well as monetary authorities last week.

During the meeting, the official said the IMF team sought an explanation from fiscal authorities on how they intend to proceed with the fiscal consolidation plan aimed at achieving a balanced budget by 2013.

“It looks like they (IMF) haven’t been able to see clearly what national government will do with the deteriorating ratios. Including how to lift tax collection and reduce the deficit,” the official said.

The team, according to the official, also raised the issue about the government’s deteriorating tax effort as revenue collections of both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) continued to fall below expectations.

The Philippine government has raised its budget deficit ceiling several times this year due to the full impact of the global economic meltdown. It expects to book a record shortfall of P250 billion or 3.2 percent of gross domestic product (GDP) this year from P68.1 billion or 0.9 percent of GDP last year.

This would eclipse the previous record level of P210.7 billion or 5.3 percent of GDP registered in 2002.

In the first 10 months of the year, the Philippines incurred a budget deficit of P266 billion or 327 percent higher than the P62.3 billion shortfall incurred in the same period last year.

This after revenues plunged 4.8 percent to P925.4 billion from January to October this year compared with P972.6 billion in the same period last year while expenditures surged by 15.1 percent to P1.19 trillion from P1.03 trillion.

The tax take of the BIR retreated by 5.1 percent to P612 billion from P644.8 billion resulting in the resignation of BIR Commissioner Sixto Esquivias IV who was replaced by BIR senior deputy commissioner Joel Tan-Torres effective Nov. 1.

On the other hand, the collections of BOC plunged by 15.7 percent to P183.9 billion in the first 10 months of the year from P218.2 billion in the same period last year.

IMF officials asked fiscal authorities how they intend achieve a balanced budget by 2013.

Meanwhile, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the IMF does not see any urgency for the Philippine central bank to implement an exit strategy at this point in time.

“They agreed with our position. Because of favorable inflation outlook, IMF sees no urgency to start implementing an exit strategy,” Tetangco said.

The BSP chief said there is no pressure or urgency for the Philippines to implement an exit strategy as inflation remains stable and well within the forecast set by the central bank for this year and next year.

Inflation is seen averaging 3.38 percent or well within the 2.5 percent to 4.5 percent target for this year and 4.2 percent or slightly below the target of 3.5 percent to 5.5 percent next year.

Furthermore, monetary authorities are likely to lift liquidity enhancing measures first before raising key policy rates once it implements an exit strategy in light of the global economic recovery.

Since December last year, the BSP’s Monetary Board has slashed its key policy rates by 200 basis points until July this year. This brought the overnight borrowing rate at a record low of 4.0 percent and the overnight lending rate at 6.0 percent.