Budget gap widens in September

The national government’s (NG) budget deficit widened to PHP 273.3 billion in September, as revenues and expenditures posted double-digit growth, the Bureau of the Treasury (BTr) said on Thursday.

Latest data from the Treasury showed the fiscal gap rose by 8.9% in September from PHP 250.9-billion deficit in the same month a year ago, “as the increase of nominal value of expenditures outpaced the increase in revenues.”

Month on month, the budget gap ballooned by 404% from the PHP 54.21-billion deficit in August.

Revenue collections jumped by 17.32% to PHP 299.7 billion in September from PHP 255.4 billion last year.

Tax revenues rose by 8.53% to PHP 253.5 billion in September, driven by the Bureau of Internal Revenue (BIR) collection which climbed by 14.79% to PHP 174.7 billion.

The Treasury attributed the rise in BIR collection to “higher personal income tax particularly on withholding on wages due to the release of salary differentials of civilian government personnel,” and increased documentary stamp tax collection.

However, revenues from the Bureau of Customs (BoC) fell by an annual 3.31% to PHP 76.3 billion in September amid a double-digit decline in import duties. An executive order reducing import tariffs on rice and other commodities took effect on July 5.

“Also, the decline (in BoC collection) is due to an alarming increase in smuggling activities within the year, as the current amount of the BoC’s seized goods has already surpassed their total haul in 2023,” the Treasury said.

On the other hand, nontax revenues surged by 111.16% to PHP 46.2 billion in September from PHP 21.9 billion a year ago “primarily due to the one-off windfall from the Public-Private Partnership (PPP) concession agreement.”

Treasury income jumped by 24.86% year on year to PHP 9.9 billion in September “driven by higher NG share from PAGCOR (Philippine Amusement and Gaming Corp.) income, interest income from NG deposits, and guarantee fee collection.”

Nontax revenues collected from other offices surged by an annual 160.39% to PHP 36.3 billion.

Meanwhile, government spending jumped by 13.15% to PHP 572.9 billion in September from PHP 506.3 billion in the same month in 2023.

“The notable increase was mainly attributed to non-interest expenses, particularly due to the implementation of capital outlay projects of the Department of Public Works and Highways,” according to the Treasury.

Expenditures rose as the government implemented the first tranche of salary adjustments of civilian government employees in August. The government also increased payments for healthcare workers’ health emergency allowance claims, BTr added.

Primary spending — which refers to total expenditures minus interest payments — increased by 14.75% to PHP 499.1 billion in September.

Interest payments picked up by 3.36% year on year to PHP 73.9 billion, as the NG serviced new loans from the International Bank for Reconstruction and Development, and the impact of foreign exchange fluctuations.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the uptick in revenues was offset by “increased debt servicing/interest costs that increased government expenditure.”

“With fiscal consolidation in place, it might be that revenue generation has been constrained, not allowing it to grow as much as it can,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

Nine-month deficit

For the first nine months of 2024, the budget deficit narrowed by 1.35% to PHP 970.2 billion from PHP 983.5 billion a year ago.

“The total deficit for the first three quarters was 9.08% short of the PHP 1.1 trillion program for the 9-month period and is at 65.36% of the PHP 1.5-trillion revised full-year program,” the Treasury said.

Revenues in the January-to-September period rose by 16.04% to PHP 3.29 trillion from PHP 2.84 trillion in the same period in 2023. It also exceeded the PHP 3.15-trillion target for the period by 4.53%.

Tax revenues, which comprised 85.39% of total collections, grew by 10.62% to PHP 2.81 trillion as of end-September. However, this was 0.79% lower than the PHP 2.83-trillion target for the nine-month period.

BIR collections also climbed by 12.73% to PHP 2.09 trillion in the nine-month period, but fell short of the PHP 2.12-trillion goal by 0.98%. This was also 73.52% of the PHP 2.8-trillion revised target for 2024.

“The double-digit year-on-year growth is underscored by higher collection on VAT (value-added tax), followed by income taxes, other domestic taxes, and percentage taxes,” the Treasury said.

BTr attributed the uptick in VAT collections to changes in the payment schedule under the Tax Reform for Acceleration and Inclusion law, which allowed taxpayers to file their VAT returns quarterly.

Customs revenues increased by 4.59% to PHP 690.7 billion in the nine-month period “due to higher VAT and import duties despite the negative performance in September,” BTr said.

However, Customs collection was 0.46% short of the PHP 693.9-billion target. The tally as of end-September accounted for 73.5% of the PHP 939.7-billion revised full-year program.

Nontax revenues as of end-September jumped by 62.54% to PHP 481.1 billion, as collections from other offices nearly doubled to PHP 270.9 billion and Treasury income surged by 33.02% to PHP 210.2 billion.

“The higher outturn for the period was attributed to the PHP 30-billion remittance from the Manila International Airport Authority (MIAA), representing the upfront payment for the MIAA-Ninoy Aquino International Airport PPP Project,” the BTr said.

As of end-September, nontax revenue collections already exceeded the government’s PHP 449.6-billion full-year target by 7%.

Meanwhile, government spending jumped by 11.56% to PHP 4.26 trillion in the first nine months from PHP 3.82 trillion in the same period in 2023.

State expenditure for the period breached the PHP 4.22-trillion nine-month program by 1.09%. To date, the NG has already disbursed 74.09% of the PHP 5.8-trillion revised full-year program.

Primary spending grew by 9.48% year on year to PHP 3.7 trillion as of end-September while interest payments jumped by 26.77% to PHP 583.3 billion.

“Likely, the deficit could still widen further on more expenditures due to infrastructure spending, interest rate expense and the impact of calamities,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said via Viber.

Mr. Ricafort said wider budget deficits “would still lead to more NG borrowings and overall debt, thereby requiring more tax and other fiscal reform measures.”

The recently imposed VAT on digital service providers and the 1% withholding tax on online sellers would help increase revenue take and narrow the budget deficit, he said. — B.M.D.Cruz