Mangled

History repeats itself. The 2027 national budget has been mangled at the Lower House in the same way the 2025 budget was.

All the gory details are trickling out. Funds were moved from health, education and foreign-assisted projects and into district-level micro-projects easily skimmed by the politicians. The same modus operandi that made the flood control looting possible.

Through the fourth quarter of 2024, I wrote a series of commentaries warning about the misshapen budget – to no avail. President Marcos Jr. claimed to have read the voluminous budget cover-to-cover and signed it anyway. The looting followed. The most staggering scandal happened.

Out economy is still reeling from the effects of the flood control plunder. Business confidence continues to drop. Investors are staying away. Our economy is now among the slowest growing in the world. Our inflation rate among the highest.

It is not that our legislators do not learn. They cannot.

The 2027 spending plan is an election budget in a political system that runs on patronage. The administration’s approval rating is falling through the floor. It is so unpopular that its endorsement for the 2028 elections is now considered a kiss of death. The only way for it to keep its head above water is to buy political support in whatever way.

Our politicians are gearing up for electoral contests in a bad business environment. They need to skim money from government projects to build their war chests. The plunder case brought against Rodante Marcoleta will have a chilling effect on all potential campaign donors – making electoral funding doubly problematic is a system that runs on money politics.

Every multilateral institution and every corporate think tank has been downgrading our growth prospects the past months. Our third quarter GDP growth numbers are expected to be out soon. Those numbers are expected to be extremely disappointing.

The “super” El Niño has yet to hit us. The first quarter of 2027 will be difficult. Drought will take its toll on our already failing agriculture. We could have difficulty importing the food we need as most of the countries we buy food from will be suffering from drought as well. Hunger could stalk the land. In the face of almost certain calamity, all our government could do is to urge us to buy water pails.

As the peso falls and inflation spikes, it is nearly certain the Monetary Board will increase interest rates again. Doing so at this stage might fail to arrest supply-driven inflation. But the move will certainly suppress economic activity – which could not take any more suppressing.

If the peso continues to fall, disposable income will keep shrinking. Businesses depending on discretionary spending will suffer. Many will simply stop operating, Unemployment will rise. Poverty will deepen. The road to a recession is open.

In the face of all these, we will not have a national budget designed to meet the challenge. What we will get is a budget intended to maximize opportunities for looting.

Reallocation of funds originally intended to support foreign-assisted projects over the past three years resulted in untold delays and cost overruns. What we have to pay in commitment fees alone runs into the billions. Cost overruns will add billions more. Opportunity costs for the economy will add more.

Over a third of the draft budget bill that passed the House will go to automatic debt allocations. We need to borrow about a third to keep that draft budget funded. The escalation of our borrowings the past four years is unprecedented. Before this year ends, our outstanding debt will amount to P20 trillion.

Having exceeded the lines of fiscal prudence, any more borrowing will entail higher interest costs. We are borrowing money only for it to be looted. We are ruled by scoundrels.

We have a pending application for US$1 more loans from the Asian Infrastructure Investment Bank. That institution is controlled by China. At the rate our relations with the Asian superpower is deteriorating, we might not have much to look forward to with this loan application.

Can the mangled House version of the budget still be corrected?

In principle, the Senate could introduce its own amendments to reduce the distortions inflicted by the congressmen. But there is little time to do it. A Senate version substantially different from the one passed by the House will require a long reconciliation session at the bicameral conference committee. This could cross into the new year and force a reenactment of this year’s national budget.

The Senate committee in charge of refashioning the budget is chaired by JV Ejercito. He has no record to speak of as an economic legislator. He was last heard making provocative statements against the Chinese ambassador.

China, despite our diplomatic differences, is a major source of our imports and a major destination of whatever little we export – including banana chips. With a distrusted government, a failing economy and the threat of a major drought on the horizon, the last thing we need is a confrontation with Asia’s superpower.

Beijing already announced they will stop exporting refined petroleum products to the Philippines. If we choose to escalate our confrontational diplomacy, we will suffer even more. And even more instantaneously.

Trust our politicians to turn bad situations even worse. A squad of senators distract from the urgent budget concerns by pandering to Sinophobia.