Proposed 2021 budget set at P4.335 trillion

MANILA, Philippines — The Department of Budget and Management (DBM) is proposing a P4.335 trillion cash-based budget for next year, with the government set to realign its priorities in light of the “new normal” environment brought about by the coronavirus disease 2019 or COVID-19 pandemic.

Budget Secretary Wendel Avisado has issued National Budget Memorandum 136, which indicated that the total cash-based budget for 2021 is now pegged at P4.335 trillion, 5.7 percent higher than this year’s budget of P4.1 trillion.

The figure, however, is lower compared to the initial spending plan of the government for 2021 amounting to P4.64 trillion, which was announced in December last year.

“In view of the limited fiscal space, the entire budget for fiscal year 2021 will need to be reviewed and reprioritized toward containing the spread and mitigating the effects of the COVID-19 in the absence of a vaccine; restarting the economy to be able to create jobs and attract investments and transitioning to the ‘new normal’ environment post pandemic,” the DBM said.

“The goal is to save lives and protect communities while making the different sectors of the economy stronger and more agile,” it said.

Of the P4.335 trillion budget, the DBM said about 40.7 percent of P1.767 trillion would be earmarked for the cost of ongoing programs and projects in Tier 1.

Automatic appropriations and special purpose funds will account for another P1.73 trillion or 39.8 percent of the budget.

This leaves a fiscal space of P841.7 billion for expanded and new programs and projects under Tier 2.

“Because of this very tight fiscal space, the prioritization of health care and food production, and the discontinuance of programs no longer in line with the ‘new normal,’ Tier 1 budget allocations will need to be reviewed and reprioritized,” the DBM said.

In line with the National Economic and Development Authority’s “We Recover as One” report, the DBM said the government’s expenditure program for 2021 should involve the improvement of health systems to strengthen the country’s capacity to address the COVID-19 pandemic, including the purchase of vaccines.

The agency also listed food security, digitization of the government and economy, and the promotion of the Balik Probinsya program among the priority expenditures of the government next year.

The DBM said programs under the National Task Force to End Local Communist Armed Conflict (NTF-ELCAC) would also be supported as well as efforts to achieve the country’s Sustainable Development Goals targets.

Meanwhile, the DBM said the government must also prepare for the transition toward the implementation of the Supreme Court decision on the Mandanas-Garcia petition, which will start in 2022.

The ruling stated that local government units’ internal revenue allotment (IRA) should cover 40 percent of all national taxes, and not just internal revenue collections of the Bureau of Internal Revenue (BIR).

The DBM said agency programs would need to be “reviewed and reduced by at least half in aggregate and devolved to the LGUs that are evaluated to have sufficient resources and capacities.”

National government agencies (NGAs), for their part, will need to focus on standards development of service delivery and the provision of technical assistance to LGUs, and strengthen their oversight functions.

“In light of the COVID-19 pandemic, NGAs may consider response measures that are local in nature but may benefit multiple LGUs, such as but not limited to biosafety laboratories, food banks, trading centers, etc. This will help foster synergy in the implementation of national and local measures in response to the pandemic,” the DBM said.

“Consistent with this, NGAs are also enjoined to design programs that will complement LGU programs instead of duplicating them,” it said.

According to the DBM, the country’s fiscal position over the medium-term is projected to be significantly hit by eroded tax bases due to the community quarantines, travel lockdowns, non-operation of firms and industries, payment deferrals and rate reduction measures implemented amid the COVID-19 pandemic.

For 2021, the DBM expects government revenues to reach P2.929 trillion, up from the revised revenue program of P2.61 trillion this year.

The disbursement program for fiscal year 2021 is also set at P 4.357 trillion, 4.4 percent higher than this year’s target of P4.175 trillion.

This would result in a 2021 fiscal deficit of P1.429 trillion, which is equivalent to 6.7 percent of the gross domestic product.