The 2024 national budget: More deficit spending

The Philippines is one of the few countries in the whole world which keeps on budgeting beyond its means to generate revenues with which to finance its intended expenditures.  A budget deficit is said to occur when government spending exceeds its projected revenues. This figure is determined on an annual basis. A deficit is the opposite of a surplus, which means that a government’s revenue exceeds its expenses.

The proposed national budget for 2024 has been set at ?5.768 trillion, which is 9.5% higher than the current outlay of ?5.268 trillion. The administration declared that this proposed national budget will continue to prioritize expenditure items that promote social and economic transformation through infrastructure development, food security, digital transformation, and human capital development. The problem is that the expected revenue, as usual, will not be enough to fund next year’s appropriation. That means more borrowing from domestic and foreign sources of funding. As if the current national debt of P14.10 trillion is not enough. And that means that the P14.10 trillion national debt may balloon into more than P17 trillion or even more by the end of 2024.

The experts tell us that a deficit may paint a picture of a nation’s financial strength and the state of its economy. It may indicate that the Philippine national government is spending far too much or its policies aren’t benefiting the economy. It isn’t uncommon to hear politicians lament over the rising national deficit or read stories in the press about how much the government is adding to its national debt. Traditional politicians, who are populists, would only want to gain favor among the electorate, by cutting tax rates and granting more exemptions for instance. This may be a boon to citizens but it results to loss of revenue which may increase a nation’s deficit.

It is reported that next year’s budget is intended to push more economic development and social justice. In terms of sectoral allocation, almost 70 percent of the FY 2024 budget is allocated for economic (29.6 percent) and social services (37.9 percent). The rest are allocated for General Public Services (15.5 percent), debt burden (12.1 percent), and defense (4.9 percent. In order to make up the difference, governments may decide to dip into their savings or they may issue bonds. Interest rates on a country’s bonds are determined by the market’s evaluation of the country’s ability to pay back its debt. But our bet is on another wave of foreign and domestic borrowings.

It is the consensus of finance and economy technocrats that the trend of increasing budget deficits is projected to lead to higher rates, especially if a country lacks sufficient savings. It is a generally accepted principle that budget deficits eventually comprise a country’s huge national debts. Each year’s deficit or surplus determines the trajectory of the debt. These deficits are strongly correlated to a nation’s broader economy and, with the community so intertwined with the global economy as a whole, this annual deficit spending would necessarily entail serious and far-reaching consequences. The more complicated consequence is how to pay for these national debts.

This government does not seem to care that the future generations of taxpayers are going to bear the heavy burden of paying for the gargantuan national debts. The billions allocated for the so-called intelligence funds are very difficult to track and would deprive the people of the chances to protect public funds through policies of transparency and accountability. And at the end, it is the people who will stand to suffer. The budget for 2024 will be another heavy load that the people have to carry even when the quality of public service remains low and even getting worse and worse.