Gov’t reduced budget deficit in June

The government’s budget gap narrowed in June as tax collections grew at a double-digit pace, supported by economic recovery.

However, increased inflation and lending costs led to higher spending in the first half of the year, leading to a widening of the six-month deficit.

The state posted a budget deficit of P209.1 billion in June, down by 7.24 percent from the shortfall last year, data released on Wednesday by the Bureau of the Treasury (BTr) showed.

For the first semester, the budget deficit rose by 11.27 percent to P613.9 billion from the level a year ago, as high inflation and borrowing costs accelerated public spending.

A budget deficit happens when the state’s expenses exceed its revenue.

“The narrower budget deficit in June could be attributed to the continued year-on-year growth in BIR (Bureau of Internal Revenue) tax revenue collections amid continued recovery of the economy,” said Michael Ricafort, chief economist at Rizal commercial Banking Corp.

“For the coming months, possible cut in local and US Fed rates would help reduce the national government debt servicing costs, thereby could help narrow budget deficit data, as well as a function of improving recurring tax revenue collections as part of the overall tax and other fiscal reform measures,” he added.

Dissecting the latest cash operations report of the BTr, the tax take of the BIR, which historically accounts for 80 percent of state revenues, grew by 4.71 percent to P172.5 billion in June. This brought its year-to-date collection to P1.36 trillion, up by 11.72 percent from last year. However, this was not enough to achieve the P1.4-trillion mid-year revenue target. The BIR aims to collect P3.05 trillion for the full year.

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The Bureau of Customs collected P74.6 billion in June, up 0.67 percent from a year ago. For the first semester, its collections rose by 5.1 percent to P455.5 billion, exceeding the P442.6-billion target for the period.

Meanwhile, the BTr chipped in P7.4 billion in June, smaller by 30.99 percent from last year, mainly due to lower dividend remittance and income from its managed funds.

Despite this, BTr was able to raise P163.9 billion in the first semester, buoyed by higher dividend remittance, interest on advances from state-owned corporations and the national government’s share in the income of Philippine Amusement.