Fiscal deficit is down for fourth straight year!

Our economic managers have reason to rejoice with the national government’s fiscal deficit falling to P62.2 billion in 2006, way below the P125 billion original target and the P80 billion revised official estimate. As a ratio to GDP, the fiscal shortfall dipped to 1.0% from 2.7% in 2005. Many factors were attributed to the realization of this positive performance, among them, the fact that we operated on a re-enacted budget in 2006 which substantially curb government spending due to a lower expenditure program. This is the fourth straight year that the national government has managed to reduce the deficit.

To complete the fiscal performance: national government revenues reached P978.7 billion in 2006, up 19.9% from P816.2 billion in 2005 and 4.6% higher than the P974.1 billion target. Revenues raised by the Bureau of Customs, Bureau of the Treasury, and other offices rose above targets to P198.2 billion, P73.9 billion, and 54.8 billion, respectively, from P154.6 billion, P70.6 billion, and P48.3 billion, also respectively. However, the Bureau of Internal Revenue, which collects two-thirds of all revenues, raised only P651.9 billion, 23.4% short of its P675.4 billion target, but higher over a year ago by P109.2 billion. The BOC easily met its target because of increased fuel imports. On the other hand, the BIR fell short of its goal due to lower tax collection on interest income arising from lower interest rates and the lower volume of government securities offered.

On the other hand, public spending rose to P1.04 trillion, below the P1.1 trillion ceiling, but above last year’s P962.9 billion. Local government units received P174.7 billion from the national government, when its programmed ceiling was only P134.1 billion. Interest payments on government debt amounted to P310.1 billion only, below the P340.0 billion program, due to lower domestic interest rates and a strong peso-dollar rate.

With this favorable fiscal situation, there is enough optimism that that the target deficit can be held down to P63.0 billion in 2007, and en route to a balanced budget by 2008.