Tetangco stresses need for clear fiscal program

MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. stressed the need for the next administration to lay down a clear fiscal consolidation program after the global financial crisis derailed the country’s commitment to balance the budget last year.

Tetangco said in an interview with reporters that a clear fiscal consolidation program would be a major confidence building factor for the next administration.

“The government has made several adjustment to its plan, the consolidation has moved this to 2013. If the government can keep itself on track, then it would be positive for the market,” he stressed.

The Arroyo administration has put in place several fiscal reforms aimed at accelerating the achievement of a balanced budget to 2008 or two years ahead of the original 2010 schedule under the Medium Term Philippine Development Plan (MTPDP).

The government managed to trim the budget deficit to P12.4 billion or 0.2 percent of gross domestic product (GDP) in 2007 from a record level of P210.7 billion or 5.3 percent of GDP in 2002.

However, the global financial turmoil forced the government to abandon both commitments and is now looking at 2013 as the new schedule where it could balance the budget.

This after the shortfall ballooned to P68.1 billion or 0.9 percent of GDP in 2008 and is now in danger of reaching a new record high of about P290 billion or P40 billion more than the deficit ceiling of P250 billion or 3.2 percent of GDP set for this year.

The deficit already swelled to P272.5 billion in the first 11 months of the year due to weak tax take and accelerated spending brought about by the implementation of the P330-billion Economic Resiliency Plan.

Finance Secretary Margarito Teves said the other day that the Cabinet-level Development Budget Coordination Committee (DBCC) agreed to adjust the budget deficit ceiling to P290 billion instead of P234 billion next year to be able to fund projects to boost the domestic economy.

Earlier, Teves admitted that fiscal consolidation could even further be pushed to 2015.

Tetangco said the BSP would support the efforts of fiscal authorities to put in place a clear fiscal consolidation plan for the medium term.