Pangasinan Today

What can be done  with a 2009 Budget Call premised on meaningless macroeconomic assumptions?  There is talk in the Department of Budget and Management that a budget review will be initiated and cuts in spending will have to be instituted.  Revenues and expenditures have to be recalculated.  DBM has three weeks to do it in time for the SONA. 
 
Last year, when the government announced that it would finally, finally balance the budget by 2008, Social Watch Philippines and the Alternative Budget Network challenged this ambitious goal. SWP pointed out that a phantom balance can be attained by changed definitions, rosy revenue estimates, revenue crutches like one-time sales from privatization, interbudget manipulation, postponed expenditures and expenses charged under vague “savings” or “overcollection of taxes.”

Social Watch was proven right once more. The global food crisis, sharp increases in oil prices and violent climate changes have exacerbated matters. The government is hard put to cobble even a phantom balance in the budget for 2008. No less than the President has finally admitted that it is out of the question. The budget will not the balanced in 2008.

The President has projected a deficit of Ph40 billion in 2008. She announced that the budget will finally be balanced in 2010. Does this mean that the budget will not be balanced in 2009? So far, the President has been silent.

Two months ago on May 2, 2008, the Department of the Budget issued its Call for the 2009 budget. The objective is a balanced Ph1.3 trillion budget. The macroeconomic assumptions as well as the proposals of the different agencies were focused on balancing the budget.

It is now the month of July. In three weeks time, the President will deliver her State of the Nation Adress (SONA). The 2009 budget proposal is scheduled to be submitted simultaneously with her speech on July 28. Failing this, the Constitution allows her 30 days. This gives her until August 2008.

The problem is, the macroeconomic assumptions which form the basis of the 2009 proposals are now meaningless. They were devastated by the escalation of oil prices, the food crisis and the series of violent typhoons which claimed hundreds of lives and millions in loss of property. Inflation which is assumed to stay at single-levels from 2008-2010 is now double-digit at 11.2%. The peso which assumed to be stable for three years at 40-43 has now reached 45.

A storm of weekly increases in the price of oil has unleashed an unprecedented increase in prices. The cost of regular government expenditures has shot up, even as the president has authorized cash distribution schemes for the poor.

The effect of the deterioration of the peso will largely be felt in the debt service burden. Every one peso deterioration in the exchange rate will trigger increases in interest payments by the hundreds of millions of pesos.

What can be done with a 2009 Budget Call premised on meaningless macroeconomic assumptions? There is talk in the Department of Budget and Management that a budget review will be initiated and cuts in spending will have to be instituted. Revenues and expenditures have to be recalculated. DBM has three weeks to do it in time for the SONA.

It is to be hoped that much needed social expenditures will not be cut and sacrificed for one-time cash giveaways as well as pre-election expenditures. It must be remembered that 2009 precedes the election year. Historically, expenditures usually escalate prior to an election year. Will this practice still continue at the expense of the MDG goals? Considering the expected political climate in 2009, reining in the budget deficit will be next to impossible. This leads to the next terrifying question: How will the deficit be financed? Can the budget be balanced by 2010 as extravagantly promised?

Instead of promising and boasting that the budget will be balanced in this or that year, why doesn’t the government just follow the advice of former Sen. Juan Flavier: JUST DOH IT!

Last week, I talked to two eminent economists. One drew a picture of the gathering of a perfect economic storm. To him, all the signals are already making themselves felt: increased unemployment, accelerating inflation, escalating prices, capital flight, and rise in poverty levels. The social consequences of the economic storm are also building up: increase in suicides, rise in criminality , social disintegration, and loss of hope.

So how come people are not rising in anger? The other economist said that all these negative developments did not occur in one fell swoop. They were building up, one after the other. By the time the perfect economic storm sweeps the country, people will be so weakened they will not have the strength to bestir themselves and take action..Agree or disagree?

Overheard at the international airport. Last week I returned from a UNDP meeting in Bangkok. As disembarking passengers walked to the immigration area, they were greeted by big tarpaulin signs, Ramdam ang kaunlaran! One returning passenger blurted out loudly to airport employees, “Bakit, ramdam ba ninyo and kaunlaran? A number answered loudly, “Oo, ramdam na ramdam namin ang kahirapan!”