PREPARATIONS for the 2010 elections and the up-and-coming economic crisis have given civil society and other cause-oriented groups more reason to keep a tight watch over the 2009 budget process to ensure judicious spending of the people’s money.

The government’s appropriations program in the year preceding an election has always been deemed an election year budget. It is the time when incumbent public officials get to maximize the use of state resources to promote themselves through infomercials, provincial sorties and other activities that would make them visible to the public.

In a bid to keep in check the administration’s spending priorities and to guard against possible misuse of the national government budget, an advocacy group called the Alternative Budget Initiative, a consortium of 56 NGOs and civil-society organizations, has combed President Gloria Macapagal-Arroyo’s request to Congress for a P1.415-trillion expenditure program for 2009 and found “overly optimistic” macroeconomic assumptions and “unattainable” growth projections in this time of economic crunch.

No place for frivolous spending?

The ABI also found a whopping P790.644 billion for “special purpose funds,” or 56 percent of the P1.415-trillion budget, and only 44 percent or P624.355 billion will go to departments and agencies. This, the group avers, is clearly inconsistent with Mrs. Arroyo’s assertion in her budget message to Congress that “with performance-based budgeting put in place, the public is assured that frivolous spending has no place in this Administration.”

“The SPF contains some lump-sum appropriations which are highly discretionary, often within the direct control of the President, with either vague or no special provisions making it prone to frivolous utilization,” the ABI noted in its report entitled, “Alternative Budget 2009: Securing Financing for MDGs Amidst Economic Challenges.”

MDGs refer to the Millennium Development Goals that the Philippines has committed to attain by 2015 under the auspices of the United Nations. These goals are focused on improvements in the delivery of basic social services such as education, health, environment and agriculture to lift millions of poor people from poverty.

In the 2009 budget, the special purpose fund increased by P96 billion from this year’s allotment while the allocation for departments and agencies rose by P92 billion.

In addition, Malacañang’s budget request contains billions of pesos for monetary support like power subsidies and cash assistance to purportedly ease the burden of rising costs of food and fuel on poor families.

Earlier this year, the Arroyo administration extended P500-cash subsidy to small power consumers which cost the government P2 billion. The ABI asserts this had no legal cover as it was not authorized under the 2008 General Appropriations Act.

The ABI, organized by Social Watch Philippines, presented its alternative budget for 2009 to Congress last September 30. It basically advocates for funding priorities in the areas of education, health, agriculture and the environment.

Tarlac Rep. Junie Cua, who took over the chairmanship of the House appropriations committee from Albay Rep. Edcel Lagman in August, said the Department of Agriculture budget (39.7 billion) includes “assistance packages “to address the problems of food security.”

These packages consist of fertilizer assistance; irrigation and other infrastructure facilities; extension and education loans for inputs; loans for shallow tube wells; surface water pumps; dryers; and seed subsidies.

Early into the years of the Arroyo presidency, there were lingering suspicions and allegations that lump-sum funds in the DA ended up into the campaign kitties of favored candidates of the administration in the 2004 elections. And who has not heard about the P729-million fertilizer scam and Jocelyn ‘Joc-Joc’ Bolante?

‘Life vests’ and ‘parachutes’ for the poor

On the eve of the approval on second reading of the 2009 proposed budget by the House of Representatives on October 11, a handful of ABI members dramatized their lobbying to legislators for the adoption of the alternative budget by wearing orange shirts and holding orange umbrellas. These, they said, were symbols of protection for millions of poor Filipinos that additional funding for education, health, agriculture and environment seeks to benefit.

Asked about the chances of having the ABI proposal considered in the amendments to the General Appropriations Bill before it is taken up in plenary for third-reading approval next month, Speaker Prospero Nograles said: “We’ll see.”

The House leader admitted that he has not gone through the ABI proposal, but said that for as long as it advocates more spending for health, education and food production, then it would be given priority. “That’s my line, that’s nearest to my heart,” he assures. “I want the budget to be crafted in that direction…to have some kind of a shock absorber for the marginalized, let’s put up the economic life vests and parachutes for the marginalized.”

But then, Nograles explains he is merely a “receiver” of proposals and a “referee” in Congress, and passes the proposals on to the appropriate committees, such as the appropriations committee in the case of modifications in the budget request of Malacañang. “I am just a referee here…but I support that line (of spending increases for education, health and other social services.)”

While the P1.415-trillion budget proposal hurdled the House after two weeks of marathon sessions that ended at dawn on October 11, it appears that it won’t have as much easy sailing in the Senate.

Financial tsunami

The ABI seems to have found a strong ally in Senator Manuel A. Roxas III, who is calling for an overhaul of the budget proposal to address problems arising from what he termed as a “financial tsunami” that hit the United States and other Western markets and would surely have adverse impact on the Philippines.

“It’s very clear that we are now facing a very different situation. Since the House has already approved the budget, it’s up to the Senate to do the changes,” the Wharton-educated legislator points out.

This is the third year of organized citizen participation in the budget process, an advocacy that some members of the Senate and the House of Representatives have embraced.

“We challenge Congress to scrutinize the executive budget and adjust it to account for the emerging worse scenarios for the rest of the year and for 2009,” says Leonor Magtolis-Briones, lead convenor of Social Watch Philippines and a professor at the UP National College of Public Administration.

“This entails prioritizing essential social programs that will protect the poor, and spur the domestic economy, which are what the civil society’s alternative budget proposal enshrines,” adds Briones, the national treasurer under the presidency of Joseph Estrada.

The ABI proposes additional funding of P42.997 billion for basic and higher education, health, agriculture and environment.

  • Basic
  • Higher Education (SUCS)
  • P18,697,000.000
  • 536,728,270
  • Rice
  • Fisheries
  • 15,725,000,000
  • 680,000,000

The biggest increase of P18.697 billion is recommended for basic education, largely for teachers’ salaries and other benefits. The next biggest beneficiary of budget increase, as proposed by the ABI, is the palay procurement program of the National Food Authority, to be doubled to P31.45 billion to buy 1.85 million metric tons of palay, or an equivalent of 10 percent of the projected harvest in 2009, at P17 per kilo.

Along this line, Roxas agrees that the 2009 budget should provide for basic goods and services for the poor, such as food, education and support programs for businesses to help them weather the financial storm.

The ABI has identified P65.7 billion in Special Purpose Funds and P17.15 billion from different government agencies as possible sources of the additional funds it is seeking to provide more financing for education, health, agriculture and environment.

NEP 2009
1. Funding requirement for the creation of new teaching positions in 2009
2. Human Resources training and Development including Teachers’ Training, Scholarship and Fellowship Grants
3. Medical/Dental and Optical Health and Nursing Services
4. Provision for accumulated benefits for Teachers under the Magna Carta
5. Additional School’s Maintenance and Other Operating Expenses for elementary and secondary schools
6. National EFA committee fund for EFA monitoring and mobilization
7. Alternative Learning Programs — Field operations of ALS including implementation of accreditation and equivalency system

Mass layoffs, reduced income from abroad

The country, Roxas says, has to brace for the possibility of mass layoffs among Filipino workers overseas, reduced dollar remittances, lower demand for Philippine goods abroad and lower incomes for Filipino families.

“This will have a huge effect here, in the coming months. But the government can still avoid the worst effects of this. We have to act now,” the senator asserts.

“First of all, we have to make sure Filipinos are fed. This can be done by providing assistance to farmers so they can harvest enough for the needs of the country, and we no longer need to import from abroad,” he says.

Roxas earlier urged President Arroyo to convene a multi-party budget summit to take up the global financial crisis and its impact on the Philippines, using the proposed 2009 national budget as a tool to shield Filipinos from its direct effects.

“If we don’t change the 2009 budget, Filipinos will surely face more hardships next year,” he warns.

Nograles, however, says the budget program that the House approved was already “a very flexible, reform-oriented budget, and a recession-responsive policy action that our people can depend on, an antidote to economic stagnation.”

What was actually approved at the House was basically what Malacañang submitted last August 26. Congressmen were given until October 14 to submit their proposed amendments to the GAB.

The spending program, as approved by the House, was based on a gross domestic product (GDP) growth projection of 6.1 to 7.1 percent even as international ratings agencies and financial institutions forecast a low of 4.4 percent ((HSBC) to a high of 6.1 percent (World Bank and Moody’s).

Government (average)
A. Multilateral Financial Institutions (average)
  • Asian Development Bank
  • International Monetary Fund
  • World Bank
  • 5.6
  • 5.8
  • 6.1
B. Large International Banks and Financial Institutions (average)
  • Citi
  • HSBC
  • UBS
  • 5.6
  • 4.4
  • 4.5
C. Other Forecasting/Rating Agencies (average)
  • Economic Intelligence Unit
  • Moody’s
  • Nomura Investments
  • Reuters IFR
  • 5.7
  • 6.1
  • 4.8
  • 5.5

Source: Prof. Benjamin Diokno’s presentation in a Budget Forum, 9 Sept. 2008, UP NCPAG

The government’s inflation target for next year is still at six to eight percent, yet as of last month, the Bangko Sentral website shows the inflation rate at 11.9 percent. The exchange rate, which is now hovering at P47 to the US dollar is pegged at P42 to P45 next year while the Dubai crude is assumed at $150 per barrel when it has already gone down to less than $80 per barrel.

Worse than last year

The ABI notes in its “alternative budget” proposal that while the government had already scaled down growth assumptions for 2008 and 2009, the figures remain “too optimistic” in view of recent trends in the domestic and international economy.

“The latest statistics only confirms what the people already feel and perceive all along. General economic performance has been worse than last year’s as higher food and fuel prices and general decline in the world economy takes its toll,” it adds.

Thus, the ABI hopes that its own “alternative budget” will be seriously considered in the amendments “to protect the poor from the economic slowdown.”

The House is scheduled to vote on the budget bill on third and final reading when Congress resumes sessions on November 10.

The period of amendments is probably the most crucial part of the budget process at the House of Representatives because it is in this phase when the so-called “congressional insertions” or realignment of funds to the legislators’ pet projects take place.

However, the bicameral conference committee composed of a select group of senators and congressmen has the last say on the items in the government’s spending program before it is transmitted to Malacañang for the President’s signature.

From a goal of having a balanced budget this year, the administration had already revised its projection and set a budget deficit ceiling of P75 billion, and P40 billion in 2009. It still aims for a balanced budget by 2010 when Mrs. Arroyo’s six-year term ends.

But a few days ago, Deputy Treasurer Eduardo Mendiola was quoted in news reports with an optimistic view that the government is on track in meeting its deficit target, noting a modest surplus of P1.7 billion in August, when total revenue collections reached P118.9 billion while expenditure was kept at P117.2 billion.

Figures from the Department of Finance (DoF) show the level of deficit at P31.7 billion as revenues stood at P790.3 billion and expenditures swelled to P822 billion.


(% Growth Rates)
1ST HALF OF 2007
1ST HALF OF 2008
Agriculture, Fishery, Forestry
Industry, of which:
  • Manufacturing
  • Construction
  • 3.7
  • 3.4
  • 4.3
  • 3.7
Services, of which:
  • TCS
  • Trade
  • Finance
  • O. Dwellings and R. Estate
  • Private Services
  • Government Services
  • 10.0
  • 7.4
  • 15.2
  • 5.8
  • 8.8
  • 2.0
  • 4.4
  • 5.0
  • 7.2
  • 7.3
  • 6.0
  • 3.2
NFIA (net foreign income from abroad)

Source: NCB, NEDA presentation to Congress, 3 September 2008

The ABI anticipates adverse effects of the U.S. financial meltdown on the Philippine economy later this year and in 2009.

“It will affect investment flows in the Philippines and will most likely increase the cost of borrowings. A U.S. economic slowdown will dampen demand for Philippine exports, affect tourism and its impact on U.S. unemployment will affect our OFWs,” it warns.

Remittances sent by OFWs to their relatives in the Philippines have long been the lifeblood and the major source of income that drives consumer spending.

The ABI notes that from January to July this year, OFW remittances were estimated at $9.6 billion, of which $4.7 billion, or 49 percent of total remittances, came from Filipinos working in the U.S.

Debt payments: biggest slice in budget pie

Like in previous years, amortization and interest payments of government debts get the gigantic share in the total budget at P681.516 billion. Of this amount, only P302.650 billion is listed in the P1.415-trillion expenditure program. The bigger amount of P378.866 billion is an off-budget item based on an agreement between Malacañang and Congress in earlier years.

According to the ABI, the Arroyo administration will be borrowing P437.086 billion next year. Of this amount, P115.58 billion will be sourced from abroad and P321.50 billion will come from local sources.

In its computation, 86.68 percent of gross borrowings in 2009 will be used to amortize existing loans.

(in million pesos)
Gross Foreign Borrowings
Gross Domestic Borrowings 332, 724 321, 501
Total Gross Borrowings 438, 667 437, 086
Amortization (foreign)
81, 304
88, 835
Amortization (domestic)
264, 667
290, 031
Total Amortization
345, 971
378, 866
Net Financing
92, 696
58, 220
Change in Cash
4, 274
4, 860
Budgetary Accounts
17, 696
18, 220
Non-budgetary Accounts
(13, 422)
(13, 360)
Gross Foreign Borrowings
105, 943
115, 585

Source: BESF 2009

Education, which should get the biggest budgetary allocation as mandated by the Constitution, is given P167.9 billion, which is barely half of the money set aside for interest payments of debts.

Local government units, in fact, will also be getting a bigger share of P249.99 billion, or 18 percent of the total budget, than education.

Education gets the biggest amount only among the line departments in the bureaucracy, followed by public works and highways with P120 billion, interior and local government with P61.9 billion, national defense with P61.5 billion, and agriculture with P39.7 billion.

The ABI asserts that the figures in the Budget of Expenditures and Sources of Financing (BESF), the main document of Malacañang’s budget proposal to Congress, belie the pronouncements in the President’s budget message, which is also submitted along with the National Expenditure Program (NEP).

“In her budget message, the President said that the ‘…need …for borrowings to finance the deficit has been reduced from P75 billion this year to only P40 billion in 2009.‘ She added that, ‘borrowings from the domestic and international markets will finance only three percent of our budget.‘ With these statements, the President intends to make it appear as though debt is getting less significant in our budget and fiscal position. Government data show otherwise,” the ABI cites.

Estimates of the group show that the P40 billion target deficit in 2009 will account for 9.15 percent of the total gross borrowings of P437, 086 billion.

The ABI also finds inconsistency in the President’s statement that “next year’s budget shows the same growth orientation with more funds going towards capital outlay and less for debt service.

“It is evident,” it says, “that debt service still corners the biggest share of available public financial resources.”

With the national and local election fever starting to catch up amidst the global financial flu, the budget watchdogs are counting on Congress to “step up to identify and unabashedly cut unnecessary, wasteful and frivolous spending” and make the budget an instrument for development by ensuring prudent spending of hard-earned taxpayers’ money.

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