Philippines Seeks Limits To Budget Deficit Increase

by Mary Swire, Tax-News.com, Hong Kong

21 August 2009

The government has indicated that the Philippines’ increasing budget deficit means various measures will have to be considered to bring it under control.

The budget deficit reached a total of PHP188bn (USD3.9bn) in the first seven months of this year – 75% of the PHP250bn deficit target for the whole of the year. Even though the deficit is still increasing, the country’s Finance Minister, Margarito Teves, was reported as saying that it is still possible to remain on target.

Teves said that it was, however, becoming harder. Government expenditure has already risen by over 18%, following a stimulus package on infrastructure and social spending, while total revenues have decreased by about 4%, primarily as a direct result of the economic recession.

It has been indicated that the government could sell assets this year, with a total expected sale value of PHP30bn, as one way of falling within its budget deficit target. Such assets could include its 40% shareholdings in Philippine National Oil Co and its exploration subsidiary, PNOC-Exploration Corp, plus the country’s grain monopoly, Food Terminal, Inc. The government’s remaining shares in the brewer San Miguel Corp could then become part of next year’s divestments, which could also include property sales totaling some PHP10bn.

The Finance Minister was also reported to have requested the country’s parliament to avoid passing policy measures which could reduce tax revenues, and instead agree to the government’s tax-raising proposals. For example, the Department of Finance has proposed changing alcohol and tobacco excise taxes (so-called “sin” taxes) to generate an estimated PHP20bn more in revenues per annum.

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