Pimentel is right about troubling ‘unscheduled’ funds

SENATE Minority Leader Aquilino “Koko” Pimentel, 3rd, last week expressed reservations about the large amount of “unscheduled” funds included in the proposed national budget of 5.268 billion pesos for 2023, noting that they raised the prospect of excessive borrowing by the government, and risked being misused. While Pimentel’s concerns may give some the wrong impression about what “unscheduled funds” really mean, we think he’s right to draw attention to their excessive amount in the government’s spending plan.

A quick primer on the 2023 budget may help. According to the plan presented by the Department of Budget and Management (DBM), the total of 5.268 trillion pesos will be financed by 3.6 trillion pesos in taxes and duties that the government expects to collect during the year from come, and 2.207 trillion pesos in new government borrowing. Obviously, these two figures add up to more than 5,268 billion pesos; the surplus (539 billion pesos) is a margin to take into account variations such as less tax collection than expected, less borrowing than expected, the possible effects of inflation or changes in the exchange rate, additional debt service costs or budget items that currently exist as unscheduled appropriations.

Unscheduled appropriations are simply placeholders in the budget to indicate where the government will apply any excess revenue it may receive. These total P588.1 billion, about P50 billion more than the surplus the financing plan would provide. The reason for this discrepancy is simply to ensure that there will be no excess revenue received that does not have a specific application.

There is nothing unusual about the overall plan; it is simply the conventional way of developing budgets. However, Pimentel drew attention to the fact that the government has already racked up 13 trillion pesos in unpaid debt – an amount that represents approximately 119,000 pesos for every soul in the Philippines – and that the budget as presented to Congress would require new borrowings, about 500 billion pula could be useless. This is where we think there is a point the government needs to address more clearly because it is the details of the proposed “unscheduled funds” that are most troubling.

DBM’s breakdown of the unprogrammed funds of 588.1 billion pesos is as follows: 149.6 billion pesos will be used for the budget line Support for Infrastructure Projects and Social Programs (SIPSP, or “Sipsip”, a name that some senators objected to), which includes about 22 billion pesos for the purchase of Covid-19 vaccines; 20.6 billion pesos are earmarked for budgetary support to enterprises owned or controlled by the State; 8.9 billion pesos for public health emergency benefits and allowances for health and non-medical workers; 10 billion pesos for the capital injection of Bangko Sentral ng Pilipinas (BSP) in accordance with Republic Act 11211; approximately P5 billion for the modernization program of the Armed Forces of the Philippines; 2 billion pula for the payment of arrears of the Bureau of Land Transport-Information Technology Department; and P1 billion for the risk management program.

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Smaller expenditures include P210.5 million for reimbursement of service development costs for the right to develop the Nanpeidai property in Tokyo, Japan, and P14 million for unit internal revenue allocation shares. of local government (LGU) from previous years. The Department of Social Welfare and Development (DSWD) will receive 2.2 billion pesos from the unscheduled funds for its “Foreign Aid Projects”, i.e. the government’s share in the financing of projects that are largely funded by loans or development grants. The bulk of the unscheduled funds, 378.2 billion pesos, will go to the Ministry of Transport (DoTr), for “loan repayment requirements”, i.e. payments for projects for which loans have already been contracted, but which have not yet been spent due, as the DBM explained, to “the DoTr’s history of low absorptive capacity with respect to loan proceeds”.

There are two points here that should be emphasized. First, many “unprogrammed” expenses deserve to be “programmed”, such as the modernization of AFP and the so-called Sipsip. Second, the huge amount designated for the DoTr, and the reason for it, indicates a shocking amount of waste and inefficiency. Borrowing money to make up for past loan proceeds that have not been properly used is difficult to justify using any logic, especially at a time when the government’s high level of indebtedness is already a serious concern.

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