MANILA, December 22, 2004 (STAR) By Des Ferriols - The country’s budget deficit amounted to P160.2 billion in the first 11 months of the year, P21 billion below target and seven percent lower from the level recorded in the same period last year, the Department of Finance (DOF) reported yesterday.

The better-than-expected figure for the first 11 months boosted government officials’ confidence that the full-year deficit would be within the ceiling of about P197.8 billion or 4.2 percent of the gross domestic product (GDP).

For November, the budget deficit reached P12.5 billion.

The DOF said the internal revenue, customs and treasury departments all exceeded their collection targets in November.

Finance Secretary Juanita Amatong said that based on the first 11-month figures, the Bureau of Customs had already reached its full-year target as early as November mainly due to the depreciation of the peso.

Amatong warned, however, that a surge in government spending is expected this month as the Department of Budget and Management closed in the gap in its accounts payable from six months to almost two months.

Overall, Amatong said revenues in November amounted to P60.5 billion. On a cumulative basis, the January to November collection reached P637.5 billion.

"Revenues were really the driving factor for keeping the deficit down," Amatong said.

On the other hand, expenditures reached P73 billion in November.

Amatong said this year’s performance was mainly due to improvements in revenue collections because the government just barely managed to stay within its spending program.

Amatong reported that tight expenditure controls and aggressive tax collection put the Arroyo administration about P21.7 billion ahead of the programmed deficit for the whole year.

If the Arroyo administration succeeds at keeping its deficit within target, it will be the first positive signal to credit rating agencies that the government was seriously addressing its fiscal crisis.

The deficit is the most-watched economic indicator as credit rating agencies and the country’s foreign creditors examine the government’s fiscal performance for any indication of looming crisis.

The 2005 deficit was revised by the Development Budget Coordination Committee (DBCC) yesterday to reflect the impact of the decision made by the Arroyo administration to absorb an initial P200 billion of Napocor’s debts.

According to Amatong, there would be no principal payments in 2005 but the debts that the National Government has decided to absorb would generate additional interest payments amounting to P18 billion, about P3 billion more than the original estimate of P15 billion.

President Arroyo has asked Congress to pass a set of measures to raise at least P80 billion more in revenues annually to avoid a possible debt default in three years.

International credit agencies have warned that the country faces a sovereign ratings downgrade if Congress fails to act.

However, only one of these measures, an increase in the excise tax on tobacco and liquor products, has been passed ahead of the Christmas recess.

Reported by: Sol Jose Vanzi

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