10/20/2009
The government’s budget shortfall shot up to a record P237.5 billion in the first nine months even before the cost of the massive relief efforts from the devastations caused by torpical storm “Ondoy” that hit late September and typhoon “Pepeng” in early October was included.The budget shortfall during the period was also 345 percent higher from a year earlier and P19.9 billion over the government’s target ceiling.
Finance Secretary Margarito Teves said the government is facing tough times, as he announced the government was considering selling assets to help balance the books.
“Our revenue collection efforts are seriously hampered by the slowdown in economic activities and tax breaks that
were granted largely through legislation,” he said.
Even without the effects of the typhoon on the government coffers the Department of Finance (DoF) already projected a P250 billion budget gap, which was later raised to P260 billion after the Palace sought a P10 billion replenishment for the calamity fund, which had ran out to only P29 million from a P2 billion allocation this year.
The government is now talking of a budget deficit of at least P300 billion, which could be breached, according to Teves, if the government fails to sell a list of assets.
Teves said the government had to find extra money to pay for reconstruction programs after two typhoons caused widespread damage on the island of Luzon over the past month.
“We need to spend for the urgent needs of our people, especially for the relief and rehabilitation of calamity-stricken provinces,” he said.
“Millions of crops were damaged and a number of bridges were destroyed. We need the resources to rebuild and fortify our economy.”
Ondoy pounded Metro Manila with the heaviest rains in more than four decades on September 26. Pepeng then struck on October 3, destroying crops and triggering landslides across the mountainous north of Luzon.
Aside from destroying rice farms, fisheries, roads, hospitals and bridges, the storms claimed nearly 1,000 lives.
The government had already sold $1 billion worth of US bonds last week to raise much-needed cash, and it plans to issue another P50 billion, or more than $1 billion, in reconstruction bonds through state assets holding firm National Development Co. (NDC).
“We remain hopeful that we will be able to dispose of government assets before the end of the year that could help us generate additional revenues for our rehabilitation and reconstruction efforts,” he said.
Nine-month revenues reached P839.8 billion, or P74.4 billion short of the government’s target. Spending rose 15.4 percent to P1.077 trillion, partly to finance a stimulus package to help the economy during the global meltdown.
The deficit for September alone reached P27.5 billion, higher than the P21.6 billion deficit incurred during the same month last year.
The Bureau of Internal Revenue and the Bureau of Customs both missed collection targets by more than P30 billion during the period.
Both the World Bank and the Asian Development Bank indicated that they will speed up program loans worth a total of $280 million to help in the country’s reconstruction efforts.
“We need not focus on P50 billion in reconstruction bonds if there are other options readily and immediately available,” Teves said.
The World Bank has in the pipeline $200 million or P9.2 billion worth of previously approved program loans the proceeds of which could be used for repair or construction of new public infrastructures.
The ADB also has $80 million or P3.68 billion worth of loans that can be fast tracked for infrastructure.
“These loans can be reprogrammed to support our reconstruction and rehabilitation effort,” Teves said.
He said the World Bank and the ADB presented to him a set of options that will allow government to “get funding from a source that will allow us to immediately start the reconstruction or rehabilitation process going.”
“That is the most important consideration,” he said.
The Palace downplayed the record fiscal blowout and the huge borrowings to plug it saying that what should be focused on is the ratio of government debts to economic output or the gross domestic product.
“If you look at, for example, the ratio of government debt to GDP, it went down from a high of 95 percent in 2004 to 57 percent as of last year, this is total national government debt including regular as well as contingent liabilities,” Presidential spokesman Gary Olivar said.
“If you look at the way our recent $1 billion bond issue performed, we apparently got the lowest interest in the market as well as the longest maturity that we have seen in a while. So, in other words, even if we were to borrow, there is a favorable window to do that, Olivar added.
“This crisis is by no means over. In some ways the hard work is just starting,” the United Nations’ humanitarian chief, John Holmes, warned last week as he toured some of the devastated areas of the nation’s capital.
Indeed, just ending the flooding that still consumes whole districts on the outskirts of the capital, Manila, will take months, officials say, and tens of thousands of business people and farmers have lost their livelihoods.
Tens of millions of dollars are going to have to be spent on repairing roads, bridges and other vital infrastructure across Luzon, while badly damaged hospitals and schools will also have to be repaired or rebuilt.
Teves said the government’s budget deficit may balloon to P300 billion to meet the damage bill.
Teves also warned economic growth this year could fall to 0.4-1.4 percent because of the storms, from an earlier forecast of 0.8-1.8 percent, although the downgraded target has yet to be made official.
Tropical storm Ketsana dumped the heaviest single day of rains in more than four decades on Manila and surrounding areas on September 26, killing 420 people and causing nearly 100 more deaths from ensuing disease outbreaks.
Typhoon Parma hit northern Luzon exactly a week later and hovered over the region for a week as a tropical storm, triggering landslides and floods that left at least 438 people dead.
The government said the storms caused at least 22.83 billion pesos in damage to agriculture and infrastructure.
But it acknowledged that was a conservative assessment which did not include the thousands of homes and businesses that were devastated.
In one flooded Manila district, fruit vendor Rey Rendaya, 52, represented countless other small businessmen when he said the flooding would push him further into debt.
“This business has no insurance and the capital I used to open this up was from a loan shark,” Rendaya said as he hammered into place a rusted corrugated tin roof that he salvaged from the flood debris.
Meanwhile, tens of thousands of farmers north of Manila — one of the country’s rice bowls — are equally distressed after losing their rice crops just days ahead of harvest.
The Philippines, already the world’s biggest importer of rice, will have to buy more to cover the storm-induced shortfall, according to Agriculture Secretary Arthur Yap.
Nevertheless, there are some reasons for optimism. One of the strongest is that the nation’s vital export sector was largely spared.
“There weren’t that many industries that were hit,” said the head of the country’s export industry association, Sergio Ortiz-Luis.
Of particular relief was that the factories pumping out electronic products, which account for half the nation’s exports, were not badly affected, according to Ortiz-Luis.
Meanwhile, government planners are looking to the fertile regions of the Visayas in the central Philippines and Mindanao in the south, both of which escaped the storms unscathed, to make up for the reduced output in Luzon.
The Philippines is also counting on its old economic saviour — the nine million Filipino workers overseas who remit money back home to help relatives and friends.
“Because of the storm damage, a lot of remittance companies have experienced a strong inflow of dollars back to the Philippines,” said Nestor Aguila of DA Market Securities.
Before the storms hit, remittances for the first eight months of 2009 had already risen 3.7 percent year-on-year to 11.34 billion dollars, according to official figures.
Source: http://www.tribune.net.ph/headlines/20091020hed1.html
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