MANILA, JULY 17, 2006
(STAR) By Paolo Romero - Efforts to exercise tighter spending and enhanced revenue collection measures enabled the government to post a budget surplus of P5 billion in June, a top Malacañang official revealed yesterday.

The official said the efforts apparently paid off since the government was able to sustain the budget surplus for three consecutive months.

The same official, however, claimed President Arroyo’s economic team is "not exactly ecstatic" over the figures since the government remains constrained in its spending as the proposed P1.053-trillion national budget for 2006 has not been passed by Congress.

"I think we are resigned on finishing the fiscal year on a reenacted budget," the Cabinet official said, referring to the P907.5-billion budget for 2005.

The government is projecting a budget deficit of P125 billion for the year, lower than the P146.5-billion deficit posted in 2005.

The surplus posted in April and May, totaling P23.4 billion, had helped narrow the budget deficit for the first five months of the year to P44.2 billion from P67.6 billion in March.

Socio-Economic Planning Secretary and National Economic and Development Authority Director General Romulo Neri said the surplus would "sound very good" to international creditors and rating agencies that could lead to better ratings for the country’s debt instruments as well as for the economy as a whole.

Despite the surplus, Neri admitted the economic managers are not exactly happy as the Arroyo administration is not authorized to spend beyond what is allowed in the reenacted budget.

As a result, growth might slow a bit in the third and fourth quarters of the year.

"We want to spend more but we’re constrained," Neri said.

"The government might not be the main driver of growth in the coming quarters."

In the first half of the year, Neri said the government undertook pump-priming activities amounting to some P30 billion, on hopes that the 2006 budget would be approved.

He said the move helped contribute to growth and create more jobs.

Growth in the last quarter of 2005 slowed down slightly as the nervous government reined in spending to achieve its year-end deficit target.

Officials said the government aims to pour revenues collected from new taxes into infrastructure projects, health, agriculture and education to generate more jobs and jumpstart the economy.

To go around the constraints, Neri said the National Development Co. has floated P10 billion worth of bonds and would float P10 billion more before year-end for socio-economic projects.

He said the funding would be coursed through government-owned or controlled corporations, which would be the ones to undertake the projects shelved due to the failure of the 2006 national budget.

President Arroyo last week expressed confidence that the country would be able to wipe out its fiscal deficit ahead of schedule due to growing political stability and declining debt.

Press Secretary Ignacio Bunye had pointed out Mrs. Arroyo is committed to balance the budget before her term ends in 2010.

"But she is now confident that this could be achieved very much ahead of target," Bunye said. "The overall trend of the government debt is declining, fiscal reform is working and we have growing political stability."

Bunye said the upbeat outlook on the economy has been reinforced by the people’s resistance to political turmoil and determination to get on with their daily lives.

He said Mrs. Arroyo remains focused on her economic plan "and the people are focused on their economic future."

Budget Secretary Rolando Andaya Jr., for his part, said the government remains committed to its goal of cutting the deficit to P63 billion in 2007 and balancing it by 2008, despite calls to revise the target.

Andaya gave assurances the 2007 budget proposal currently being drafted is en route to a balanced budget for 2008.

Andaya, who is also the Development Budget Coordinating Council (DBCC) chairman, added the focus of the proposed budget is still "really to raise revenues" to enable the government to raise the level of spending.

"The only way to raise the level of spending is to improve revenue administration and not raise the deficit," he said.

Andaya said the DBCC has to meet and it is still crafting the budget for next year, consistent with the goal of a zero deficit by 2008.

The 2007 budget is being readied to enable the President to submit the proposal before Congress in her State of the Nation Address (SONA) on July 24.

Andaya earlier estimated the proposed 2007 budget might reach P1.14 trillion.

Chief News Editor: Sol Jose Vanzi

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