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‘Cash-based’ budget to cut underspending

The Development Budget Coordination Committee (DBCC) on Tuesday presented to the Senate finance committee the proposed PHP3.757-trillion national budget for 2019, the third budget of the Duterte administration and the first “cash-based budget” of the government.

The proposed 2019 National Expenditure Program represents 19.3 percent of the gross domestic product (GDP) and is 13 percent higher than the 2018 budget.

In his presentation, Budget Secretary Benjamin Diokno said the DBCC adopted the annual cash-based system for next year as a means to minimize and gradually eliminate underspending in government, as well as to modernize the country’s budgeting system to become at par with international standards.

Diokno pointed out that since President Rodrigo Duterte came into power, the administration has instituted measures to cut underspending in government.

“Underspending in the past administration caused delayed or non-delivery of essential public services. This deprived our people of better opportunities, and a comfortable life and bright future they deserved,” he said.

Diokno said underspending reached 13 percent in 2013 and 2015, which resulted in foregone projects amounting to a total amount of PHP631 billion.

While reforms by the Duterte administration led to a sizable reduction in government underspending to only PHP85.2 billion in 2017, Diokno said a cash-based budget would further enhance government efficiency in delivering basic goods and services.

“Under a cash-based system, obligations or contracts for programs, activities and projects intended to be implemented for the fiscal year should be fully delivered by the end of the fiscal year,” he said.

“Payments for all the programs and activities should also be made within the fiscal year, which could be extended until the first three months of the next fiscal year,” he added.

Under the old system, payments could be done in two years and beyond.

“The shift would lead to a more transparent and accountable government as agency performance is measured in terms of actual delivery of goods and services, not on contracts awarded,” Diokno said.

Expenditure Priorities

The theme of the proposed 2019 budget is "Building a bright future for the Philippines and its people."

"The theme is consistent with the administration’s goal of transforming the country into a middle income society where everyone has the opportunity to make his/her life better through the provision of infrastructure and human capital development,” Diokno said.

The expenditure priorities of the cash-based 2019 National Expenditure Program reflect these objectives.

Education still gets the lion’s share of the 2019 budget, with a total funding of PHP659.3 billion, a 12.3 percent increase from last year’s PHP587.1 billion.

Infrastructure is also given top priority by the Duterte administration with a proposed total infrastructure funding of about PHP909.7 billion for fiscal year 2019.

Under the infrastructure program, road networks will receive the largest share of the infrastructure budget at PHP346.6 billion, equivalent to 38 percent of the total infrastructure program.

Meanwhile, construction of school buildings will have a budget of PHP37.6 billion in 2019.

Construction of flood control systems and irrigation systems will be allocated with PHP133.6 billion and PHP26.3 billion, respectively.

Meanwhile, railway projects will have a budget of PHP24.6 billion in 2019.

Social mitigating measures provided under the Tax Reform for Acceleration and Inclusion (TRAIN) Law is also funded in the proposed 2019 budget with the Unconditional Cash Transfer Program getting PHP37.6 billion, Pantawid Pasada Program with PHP3.9 billion, and the PUJ modernization program with PHP2.7 billion.

Key Budget Dimensions

By expense class, Personnel Services (PS) expenditures has the highest share with an allocation of PHP1.185 trillion, equivalent to 31.5 percent of the 2019 budget.

Capital Outlays has the second largest share at PHP758.4 billion (20.2 percent) to cover the requirements for flagship infrastructure projects under the “Build, Build, Build” Program of the government.

Maintenance spending has an allotment of PHP557.5 billion or 14.8 percent of the proposed budget.

Allotment to LGUs will also receive significant allocations, amounting to PHP640.6 billion and accounting for 17.1 percent of the proposed total cash-based appropriations.