Economic managers cite DAP ‘impact’ in 2013 memo to Aquino
MANILA, Philippines – The Department of Budget and Management (DBM) on Friday, July 11, released the memorandum sent by the country’s economic managers to President Benigno S. Aquino III towards end-2013, recommending the termination of the “successful” Disbursement Acceleration Program (DAP).
Budget Secretary Florencio “Butch” Abad, Finance Secretary Cesar Purisima, and National Economic and Development Authority (NEDA) Director General Arsenio Balisacan sent the termination memo to the President through Executive Secretary Paquito Ochoa Jr on December 28, 2013.
The DBM uploaded the memo on its website hours after Aquino announced that he did not accept the resignation offer of Abad, who is being pressured by various groups to leave office as “chief architect” of DAP, parts of which were deemed unconstitutional by the Supreme Court.
“All economic and fiscal indicators point to the conclusion that DAP has achieved its objective as a fiscal stimulus measure. We thus recommend, for His Excellency’s consideration, the termination of the DAP, as well as the vigorous implementation of budgetary reform measures to ensure the irreversibility of reforms,” the economic managers said in the memo.
The memo outlined the “status of the DAP as a package of reform interventions to address inefficiencies and leakages in government spending and to stimulate economic growth” and the ongoing implementation of institutional budgeting reforms to sustain “the pace, quality and accountability of public spending.”
The economic managers said the sustained implementation of the DAP since 2011 has led to a “great improvement” in disbursements.
“In the fourth quarter of 2011, spending expanded year-on-year by 32.5%, which pushed the full-year growth of disbursements to 2.3% year-on-year. Disbursements have further strengthened to 11.8% as of end-September 2013,” they said.
They said that infrastructure spending, in particular “recovered” from a 29% contraction in 2011 to a 34% growth as of end-September 2013; within that period, the growth of Maintenance and Other Operating Expenses (MOOE) improved from 11% to 21%.
They also cited the following “impact” of the DAP:
- Improved government spending contributed significantly to the gross domestic product (GDP), averaging 7.4% in the first 3 quarters of 2013
- Due to DAP and other public expenditure reforms, a significant increase in the share of the Social Services sector from the National Budget from 28.8% in 2003 to 34.9% in 2013, and the Economic Services sector from 21% to 25.4%. Debt Servicing decreased from 27.4% to 16.6%
- An expanded Pantawid Pamilyang Pilipino Program (4Ps), from about a million indigent household-beneficiaries with a P10.9-billion ($250 million*) budget in 2010, to 4.3 million household-beneficiaries with a P62.6-billion ($1.43 billion) budget by 2014
- Increased education and health sector budgets “to close lingering resource gaps,” and boosted infrastructure spending from P274 billion ($6.29 billion)
or 2.3% (of the budget) in 2013, to P824 billion ($18.9 billion) or 5% by 2016
- Helped bolster the stability and competitiveness of the economy, in the absence of new taxes (except for the sin tax reform law) and without incurring more debts (as a percentage of GDP)
- The Philippines finally received investment grade credit ratings from all the top sovereign credit raters in 2013
- The country rose in the Global Competitiveness Index (GCI) rankings by 28 places to 59th in 2013
The economic managers said the DAP “enabled the Administration to implement programs and projects worth a total of P140.8 billion ($3.23 billion) from 2011 to 2013” by “augmenting expenditure items using savings from programmed appropriations and mobilizing additional revenues for unprogrammed items.”
The economic managers said that DAP as a “policy intervention” had achieved its purpose, citing the “marked improvement in the pace, quality and accountability of government spending.”
“This is evident in the downward trend in the release of funds for DAP projects: from P75.1 billion ($1.72 billion) in 2011, P53.2 billion ($1.22 billion) in 2012 and to P16.0 billion ($367.4 million) in 2013,” they said.
As a background on the use of savings and unprogrammed funds, the economic managers cited Article VI Section 25(5) of the 1987 Constitution, authorizing the President to augment appropriations using savings which “has been used by all post-EDSA Presidencies, using various mechanisms, to address urgent challenges.”
They also cited the “Reserve Control Account (RCA)” as the first mechanism introduced for imposing mandatory reserves from the budgets of agencies and Special Purpose Funds – ranging from 5% to 25% – to generate funds for various purposes, first introduced by President Corazon C. Aquino through Administrative Order No. 137 (1989).
“The use of the RCA was sustained by the Ramos and Estrada Administrations, citing ‘economic difficulties brought about by the peso depreciation’; as well as the ‘erosion of targeted surplus, resulting from increasing shortfall in revenues for the year,’” they said.
The economic managers said that the Arroyo administration replaced the RCA with “Overall Savings” which is “a mechanism to augment priority programs using savings – including unreleased appropriations and unobligated allotments.”
“DAP also entailed the use of Unprogrammed Funds, which were found in the annual GAAs since 1989,” they said.
The termination memo, which has a downloadable version in the DBM website, has an Annex portion with charts and tables. It also enumerates the rationale for the DAP.
The document was sent to the President several months after various groups filed petitions before the Supreme Court, questioning the legality of the DAP. In the memo, the economic managers cited "the unwarranted controversy" generated by the program and the end of the fiscal year as reasons for making the report.
Senator Jose “Jinggoy” Estrada, was the first to bring up the DAP in a privilege speech in September 2013, where he insinuated that lawmakers who voted for the impeachment of then Chief Justice Renato Corona had received funds for projects under the DAP, which Malacañang had denied.
The Aquino administration maintains it has no regrets over the DAP is it was done in good faith – to spur economic growth by moving funds from slow-disbursing projects to fast-disbursing ones – but critics insist administration officials, including the President, should be held accountable for violating the Constitution. – Rappler.com
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