MANILA, November 4, 2003  (STAR) By Des Ferriols - The government, countering reports of a looming budget deficit blow-out this year, said yesterday it was on track to meet its 2003 shortfall target of P202 billion.

"I’m confident we will still meet the full-year target," Finance Secretary Jose Isidro Camacho told reporters as he assured that the government’s austerity measures would remain in place in the first quarter of 2004.

Camacho said the government will take the same tact it used this year and build up some fiscal headroom early in the year before undertaking a calibrated relaxation of its budget towards the final quarters of 2004.

The finance chief said the Development Budget Coordinating Committee (DBCC) still has to discuss the particulars of the 2004 budget.

"We did that in 2002 and that’s where we got into trouble," Camacho said, referring to the front-loading of government expenditures in the first quarter, leaving no room for adjustment for the rest of the year.

"We released over 70 percent of the budget in the first quarter of that year and that proved to be ineffective," he admitted.

As a result, the Arroyo administration overshot its deficit target by about P82 billion in 2002.

The 2004 budget deficit is expected to reach P198 billion.

Camacho said it was critical to meet this target to establish a convincing trend that the Philippines is keeping to its commitment to balance the budget by 2009.

He said the improvement in the government’s revenue collections this year coupled with tight spending would enable the government to meet its target to reduce the deficit to only 4.2 percent of the gross domestic product (GDP) by 2004.

The Arroyo administration had originally committed to balance the budget by 2006 but the 2002 deficit crisis had set it back by at least three years.

After recalculating its projected expenses and revenue collections, the administration said the government would not be able to balance the budget until 2009.

The government, which shocked investors last year by blasting through its deficit targets three times, is expected to announce its October fiscal performance in the third week of November.

In September, the Philippines – the largest sovereign debt issuer in Asia outside Japan – breached its deficit target for the second straight month as the government accelerated spending while revenues slowed.

It said last month the September shortfall was P29.1 billion, far above the goal for the month of P22 billion.

The deficit in the first nine months was P142.7 billion, still within the target of P149.5 billion for the period.

For October, Camacho said he expected government expenditures to be under control.

"We agreed by the end of September for DBM to put a restraint on expenditures," he said.

Officials have said they expect the major revenue agencies – the tax and customs bureaus – to meet their October targets.

At P202 billion pesos, the budget deficit would be equal to about 4.7 percent of projected GDP.

Reported by: Sol Jose Vanzi

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