MANILA, Philippines – Lawmakers scrutinizing the 2024 national budget zoomed in on the decrease in public spending amid slowing economic growth.

During the House Committee on Appropriations’ first day of deliberations on the proposed 2024 national budget on Thursday, August 10, Budget Secretary Amenah Pangandaman told lawmakers that government agencies’ average obligation rate, also referred to as absorptive capacity, is only 30.5% of the P3.4 trillion released by the Department of Budget and Management (DBM).

The obligation rate is among the DBM’s financial performance ratios used to assess the performance of government agencies. It is derived by comparing actual obligations (liabilities legally incurred and committed to be paid for by government either immediately or in the future) against allotments.

Agencies with the lowest obligation rates are the Department of Information and Communications Technology (5.6%), the newly formed Department of Migrant Workers (10%), and the Department of Energy (10.5%).

Among those with the highest obligation rates are the Department of Foreign Affairs (54.2%), the Department of Finance (49.7%), and the Department of Public Works and Highways (49.6%). 

Pangandaman said the DBM has ordered government agencies to submit a report on the status of their projects, identify bottlenecks, and submit a “catch-up plan.” 

“We requested all the agencies to submit their catch-up plans no later than September 15, 2023,” Pangandaman said.

Departments and agencies may still utilize their allocation until December 31, 2024, except for personnel services which may only be obligated and disbursed until December 31, 2023.

Meanwhile, Pangandaman said the DBM has already released P4.7 trillion or 90% percent of the entire 2023 budget. This leaves a balance of  P533.27 billion which will be released in the upcoming months to support the priority programs and projects of government agencies, subject to budgeting rules and regulations. 

Underspending impedes growth

The first day of budget deliberations coincided with the announcement of the Philippine Statistics Authority (PSA) on the country’s second quarter economic performance, where gross domestic product (GDP) slowed to 4.3%, much lower than analysts’ estimates of 6%. Analysts described the figure as “very disappointing.”

PSA data showed that government expenditures contracted by 7.1%, which strongly contributed to the overall slowdown of the economy.

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The Philippine government runs a budget deficit, where expenses exceed revenues, and resorts to borrowing to support growth. Slow spending of government agencies defeat this financial strategy of leveraging debt to spur economic activities.

Meanwhile, figures from the Bureau of the Treasury revealed that the government missed its P2.6-trillion expenditure program by 6.6%, while spending inched up by just 0.4% to P2.41 trillion from January to June.

“We view low utilization rate as the agency’s limited capacity to utilize new funds. However, those agencies who need to increase their utilization rates have promised to produce catch-up plans during the budget deliberations,” Pangandaman said. – Rappler.com

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