Higher tax yield trimmed gov’t deficit in March

A strong growth in revenues that outpaced modest spending trimmed the Marcos administration’s budget deficit in March, boding well for the government’s fiscal plans.

The Bureau of the Treasury (BTr) reported on Wednesday that the state had posted a fiscal gap of P195.9 billion in March, 6.82 percent smaller than the deficit a year ago.

A budget deficit happens when the government spends beyond its means, while a surplus means the opposite. In the first quarter, the budget shortfall stood at P272.6 billion, slightly up by 0.65 percent.

Dissecting the BTr’s latest cash operations report, the government collected P287.9 billion in March, rising by 11.32 percent. This brought three-month revenues to P933.7 billion, 14.05 percent higher than last year.Collections in March still managed to grow despite the 6.78-percent contraction in revenues of the Bureau of Customs (BOC) to P74.9 billion due to holidays that cut the number of working days during the month. Nevertheless, cumulative three-month BOC receipts grew by 2.35 percent to P218.9 billion.

The Bureau of Internal Revenue (BIR), which historically accounts for 80 percent of total state revenues, raked in P145.3 billion in March, up by 3.11 percent. In the first quarter, BIR collections rose 17.15 percent to P591.8 billion.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said rising revenue collection augured well for the government’s fiscal consolidation plan, which was recently revised to raise the 2024 deficit limit to P1.5 trillion, from P1.4 trillion previously.

The Marcos administration is planning to borrow a total of P2.46 trillion from creditors at home and abroad in 2024 to help bridge its budget deficit.“If revenue intake continues its uptick this year because of better economic performance, then it would not be a surprise that the fiscal consolidation plan is on track for this year,” Asuncion said.

Risk to spending

Meanwhile, state spending grew by 3.18 percent to P483.8 billion in March as lower subsidies to state-run corporations and fund transfers to local government units weighed on disbursements.Since the beginning of the year, the government has spent a total of P1.2 trillion, rising by 10.72 percent on an annual basis.

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Moving forward, Asuncion said a high interest rate environment would pose a “huge risk” to expenditures and economic growth.

“Government indulging in more meaningful and growth-focused spending will indeed be constrained with its focus on debt management and fiscal consolidation, as we have emphasized for quite some time now,” he said.

”We are expecting capital formation to be having a bigger part in this year’s growth, with the usual consumption doing the heavy lifting as well,” he added.