Budget gap balloons in April as gov't spends more, collects less taxes due to pandemic

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Metro Manila (CNN Philippines, May 27) – The country's budget shortfall swelled in April as the government poured more funds into COVID-19 response and saw tax collections drop after many businesses went on lockdown, latest Treasury data showed.

The government spent ₱461.7 billion in April alone, double the ₱221.8 billion released a year ago. The spending tally was pushed up by fund releases for the government's cash aid program to 18 million poor families estimated at ₱100 billion, as well as other subsidies via the Small Business Wage Subsidy Program and additional grants to local government units to combat outbreaks.

These emergency spending measures were allowed by the Bayanihan to Heal as One Act, which allowed President Rodrigo Duterte and the Cabinet to realign and free up some ₱353 billion from the national budget to respond to the pandemic.

The second tranche of cash aid to 17 million families – made up of 12 million households that still remained under lockdown in May and 5 million new beneficiaries – is expected to be released this month, alongside other doleouts to help displaced workers sustain their basic needs for now.

READ: Over 20 million families to receive next tranche of cash aid, says Roque

These expenses pushed the four-month disbursements tally to ₱1.31 trillion, up 31 percent from the same period in 2019.

On the other hand, state revenues crumbled in April compared to last year, down 39 percent to just ₱187.8 billion. The Bureau of Internal Revenue reported the biggest drop, with collections down 61 percent to ₱90.5 billion from ₱235.5 billion previously as it was not able to collect annual income tax payments and other sales-based duties.

"The slower outturn was attributed to the Luzon-wide enhanced community quarantine, which was also implemented in other provinces, and the extension of deadlines for the filing and payment of income and other taxes due for the month amid the pandemic crisis," the bureau said in a statement Wednesday.

Most businesses, expect for those deemed as "critical" industries, went dark since mid-March due to the government's stay-at-home order to control coronavirus infections. The BIR has likewise pushed back the tax filing deadlines to June.

The Bureau of Customs also saw collections slip by a third to ₱34.4 billion. The difference was partly covered by non-tax revenues, which more than tripled to ₱62.8 billion as the Treasury received cash dividends from state-run corporations to finance the coronavirus response.

The shortfall in revenues against actual spending led to a ₱273.9-billion budget deficit, reversing the April 2019 seasonal surplus.

The January-April fiscal position logged a ₱347.9-billion fiscal gap, which ballooned from the narrow ₱3.4 billion deficit during the same period a year ago.

ING Bank economist Nicholas Mapa said the wider deficit is as expected, but said "timely, substantial and targeted spending" can actually help the economy bounce back faster.

"The battle cry now for the government should be 'whatever it takes' with the authorities resisting to enter austerity mode to ensure that the economic hardship is minimized so that we can get the economy back in form at the soonest," Mapa said in a market commentary.

The country has resorted to additional loans from foreign institutions to plug the gap. The full-year budget gap has been adjusted to ₱1.56 trillion, equivalent to 8.1 percent of gross domestic product.

The pandemic is said to cost up to ₱2 trillion in losses, the President's economic team has said.