Arroyo’s nightmarish fiscal legacy

Whether they like it or not, presidential aspirants are potential heirs to a record-high budget deficit as the Arroyo government spent more than what it earned. The Filipino people, meanwhile, stand to feel the lasting effects of President Gloria Macapagal Arroyo’s unsound fiscal policies.

The 2009 budget deficit could hit P290 billion-P298 billion as estimated by Department of Finance Secretary Margarito Teves, BusinessWorld reported. Teves attributed the gaping deficit to “combination of unfavorable external developments, some revenue-eroding measures, and result of the damage caused by typhoons.”

Apart from the reasons cited by Teves, poor tax collections significantly contributed to the drying up of national coffers. The Asian Development Bank (ADB) said the higher-than-expected deficit “was caused by the failure of the Bureau of Internal Revenue (BIR) to meet its monthly tax collection goals,” Inquirer.net reported. In the 11-month period last year, the BIR fell short of P50 billion from its target, citing the devastation wrought by typhoons as the main reason.

Early last year, the government also blamed its P330-billion Economic Resiliency Plan for bloating the deficit. But independent think-tank IBON Foundation said in its special report that “the Arroyo administration’s deficit problems are not due to any stimulus efforts to deal with the crisis but because it is not addressing the roots of the deficit problem: graft and corruption, trade liberalization, foreign investment incentives, unproductive debt service and military spending.”

The near-P300-billion deficit blew past the government’s P250-billion ceiling for the year, which was surpassedin just 10 months. This amount is by far the largest under the Arroyo administration, larger even than that of previous regimes. Earlier government estimates even put the yearend budget deficit at P320 billion, or roughly four percent of the country’s 2009 gross domestic product (GDP).

In view of the staggering deficit figure, the Bangko Sentral ng Pilipinas (BSP) has urged the Arroyo government to go back to the “deficit reduction path” this year to give the country “better chances at cornering a bigger share of rising foreign direct and portfolio investments,” Inquirer.net reported.

Even credit rating agencies have raised their warning of a worse fiscal position for the Philippines in 2010 as government spending dramatically exceeded revenues last year. Fitch Ratings projected that the budget shortfall this year could swell to as high as P320 billion. Meanwhile, Moody’s Investors Service said the budget deficit may hit P291 billion or 3.5 percent of the GDP, citing the lingering effects of global economic recession, reported GMANews.tv.

Despite the bleak projections, local experts said the budget deficit problem is not in a worrisome situation yet if it is to be viewed of the current global economic crisis, ABS-CBNnews.com said.

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