Spending on public goods and services more than doubled in April as the government tried to ease the pain inflicted on vulnerable sectors by the COVID-19 pandemic, but revenues suffered due to delayed tax collections, resulting in a P273.9-billion budget deficit—the biggest monthly fiscal gap to date.
The latest Bureau of the Treasury data released on Wednesday showed last month’s deficit reversed the P86.9-billion surplus posted a year ago, as the month of April historically recorded surpluses owing to the mandatory April 15 deadline to file and pay the previous year’s income taxes, allowing the take of the Bureau of Internal Revenue (BIR)—the country’s biggest tax-collection agency—to surge during the month.
But this year, the BIR had to extend the payment deadline for 2019 income tax return payment three times before finally settling on June 14 as the government had also prolonged the enhanced community quarantine, which imposed movement restrictions, since mid-March.
The government’s tax and nontax revenues declined 39.17 percent to P187.8 billion in April from P308.7 billion a year ago.
Nontax revenues jumped 215.98 percent year-on-year to P62.8 billion as the national government ordered state-run corporations to remit their dividends earlier than usual to finance COVID-19 response under the Bayanihan to Heal as One Act, but it was not enough to offset the 56.74-percent drop in tax collection to P124.9 billion.
The BIR’s take slid 61.56 percent year-on-year to P90.5 billion, while the Bureau of Customs collected P34.4 billion in import duties and other taxes, down 33.38 percent.
On the other hand, expenditures surged 108.14 percent to P461.7 billion in April from P221.8 billion last year.
So-called productive spending, or the amount spent net of interest payments on borrowings, grew by a faster 121.81 percent to P439.8 billion last month.
“Spending was boosted by the releases of funds for the implementation of the first tranche of the social amelioration program and the small business wage subsidy program, Bayanihan grant to provinces, cities and municipalities, and other recovery and rehabilitation measures of the national government under the Bayanihan to Heal as One Act,” the Bureau of the Treasury explained.
At the end of the first four months, the budget deficit swelled by 10,214.56 percent to P347.9 billion from only P3.4 billion as of end-April last year.
Total revenues from January to April declined 3.36 percent year-on-year to P963 billion, while four-month disbursements climbed 31.12 percent to P1.31 trillion.
Department of Budget and Management projections showed the budget deficit would widen to P1.56 trillion, or 8.1 percent of gross domestic product this year, P1.43 trillion next year and P1.18 trillion in 2022 from P660.2 billion last year.
During the near term, government spending would remain elevated in order to better respond to the uncertainty caused by the COVID-19 crisis, while revenues were expected to remain weak due to socioeconomic shocks.
To finance these huge budget deficits, the government will have to borrow more from multilateral lenders as well as issue bonds onshore and offshore, even as “increased risk aversion of investors can lead to an increase in borrowing costs,” according to the “We Recover as One” report released by the state planning agency National Economic and Development Authority last week.
As such, the government must remain prudent and agencies should “realign expenditure priorities to facilitate the transition and adjustment to the ‘new normal,’” the report said.
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