PH keeping deficit-to-GDP ratio target to safeguard credit ratings

Budget Secretary Benjamin Diokno, in his weekly Breakfast with Ben briefing on Wednesday, said the 3.2 percent deficit-to-GDP ratio is the government’s “commitment to the international community.” (File Photo: Department of Budget and Management)

MANILA — Economic managers are keeping the government’s budget deficit level at 3.2 percent of the gross domestic product (GDP) for 2019, to safeguard the economy’s investment grade credit ratings amid threats of a re-enacted budget.

Budget Secretary Benjamin Diokno, in his weekly Breakfast with Ben briefing on Wednesday, said the 3.2 percent deficit-to-GDP ratio is the government’s “commitment to the international community.”

He explained that this ratio is “slightly off” compared to the current administration’s medium-term fiscal plan of having a 3 percent deficit to GDP ratio.

He attributed the higher level of share of budget deficit to domestic output next year to the government’s massive infrastructure program dubbed “Build, Build, Build”. Under this program, the government targets to spend at least PHP8 trillion for its infrastructure program until the end of its term in 2022.

“That’s why we cannot agree (to) a higher spending without them identifying the source of funding. So the 3.2 (percent) deficit (level), if they want for example to increase it to 4 percent, that’s sending a signal to the international community. We might be downgraded, which means higher interest rates for everybody. And that’s not good for the economy. We’re very careful. That 3.2 percent is not negotiable,” he stressed.

For 2019, the government is proposing a PHP3.757 trillion national budget.

A cash-based budgeting system is also being proposed, with the budget to be used only for a year, a change from the obligations-based system, wherein funds can be used within a two-year period. The budget reform is being proposed to ensure the sustainability of the reforms even after the term of the Duterte government.

With both the House of Representatives and the Senate deciding to put budget hearings on hold pending revisions of the proposed national budget, citing the need to revise budget cuts for some agencies and programs, Diokno said they are ready for any eventuality.

The Department of Budget and Management (DBM) chief said a re-enacted budget is their last option to ensure funding for their programs, stressing that “Plan A is to have it approved.”

He said they are still studying the implications of a re-enacted budget on programs identified for next year, adding that possible sources of additional funds may be the increased collections this year. “Plus the trend is we are over-collecting so we can have the money to finance the supplemental budget,” he added.