DEFICIT SEEN BELOW TARGET THIS YEAR
MANILA, OCTOBER 24, 2006 (STAR) By Des Ferriols - Finance officials finally admitted yesterday that the budget deficit would be below target this year, paving the way for what could be a significant reduction in borrowing in 2007.
The Bureau of Treasury (BTr) said yesterday that based on the spending and revenue performance for the first nine months of the year, the government would outperform its deficit target this year even with the supplemental budget approved by Congress.
Government officials have been careful not to spur market expectations but according to National Treasurer Omar Cruz, the momentum of the first three quarters was likely to carry over to the last quarter of the year.
"One thing is clear and that is the fact that we will be ahead of our program," Cruz said adding that "we cannot pick a specific number because that is less easy to predict."
Even with the P46.4-billion supplemental budget approved for spending in the last quarter, Cruz expressed optimism that the budget had enough room for spending to go up and still stay below the deficit ceiling.
According to Cruz, the Development Budget Coordinating Committee (DBCC) was already in the process of finalizing the fiscal budget for 2007 which would ultimately determine the government’s borrowing program.
"The market will be shocked at the degree of reduction in our borrowing program next year," he said. "We are not changing the bottom line, specifically keeping the deficit at P63 billion. But borrowing will go down," Cruz said.
The government slipped back into deficit in September but stayed way below its quarterly deficit target as expenditures lagged far behind revenue collections.
Operating under the re-enacted 2005 budget, the National Government has been consistently outperforming its original 2006 fiscal targets, containing its budget deficit well below the target as expenditures continued to tighten despite the increase in revenues.
The slowdown in public spending has worried investors and credit rating agencies who expressed fears that the inability to implement critical infrastructure and social services programs would eat into the growth momentum.
Under the re-enacted budget scenario, the country’s gross domestic product (GDP) was projected to grow by 5.3 percent, compared with the projected growth rate of 5.7 to six percent had Congress passed the 2006 budget.
Chief News Editor: Sol Jose Vanzi
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