What we know so far: Funding the fight vs the coronavirus

Aika Rey

This is AI generated summarization, which may have errors. For context, always refer to the full article.

(UPDATED) The available budget is definitely higher than P275 billion, but the bigger question is, is there enough cash?

MANILA, Philippines (UPDATED) – “Nasa’n ang P275 billion?” (Where did the P275 billion go?)

That’s the question often thrown around when the public asks about the funding for measures against the coronavirus outbreak in the Philippines. 

Where did the figure “P275 billion” ($5.43 billion) come from? Republic Act No. 11469 or the Bayanihan to Heal as One Act makes no mention anywhere of P275 billion.

But it could be traced back to the March 23 deliberations of the Bayanihan law when it was still a bill, when Deputy Speaker Luis Raymund Villafuerte first said there are P275 billion worth of funds available to cover the measures against the pandemic.

This amount, Villafuerte said, will be sourced from off-budget accounts, or government agencies’ income from operations.

But there could be more than that.

RA 11469 Section 4(v) gave the President special budget powers, which effectively allow him to do away with the original purpose of any program under the executive branch, including government-owned and -controlled corporations (GOCCs), and use these unspent balance to add to the war chest needed to fight the virus.

Take note that the operational term is “add,” meaning existing budgets of the health, social welfare, and labor departments, among others, will be augmented by these funding sources.

This means that the available budget to deal with the pandemic could be even higher than the P275-billion figure thrown around by congressmen. Now, the more important question is: How will we fund the war chest?

Cash needed

The budget to deal with the coronavirus is not the problem, but rather the availability of cash to be used to fund these items.

Why? There are a lot of appropriations that can be tapped to deal with the pandemic – the initial amount of P189.82 billion ($3.75 billion) provided by the powers under the Bayanihan law, and the existing funds under other agencies, as well as disaster and contingent funds.

But note that these expenditures for the coronavirus, on top of what was expected by the economic managers in 2019, need to be funded immediately.

In the April 6 Malacañang report on the implementation of the Bayanihan law, the Bureau of Treasury (BTr) said it has so far received P100.67 billion ($1.99 billion) from dividends and unspent cash from agencies, and released some P101.642 billion ($2 billion) for the social amelioration programs of the government.

Of the P101.642 billion cash, P100 billion ($1.97 billion) went to the emergency cash aid program to 18 million low-income households, out of the total population of 108.7 million Filipinos or 21.74 million families. This amount is only half of the total needed for the program.

Aside from the pandemic funding requirements, the BTr is also funding agency budgets for the month of April to June. This includes salaries of government personnel that can easily require some P100 billion worth of cold cash per month.

To top it all, revenues are running low as lockdowns are being implemented left and right. The National Economic and Development Authority had noted that 73% of the country’s gross domestic product comes from the economic activity in Luzon, which is currently under a lockdown.

The government needs cold cash immediately. That’s where the problem lies. No less than President Rodrigo Duterte has sounded the alarm, telling Finance Secretary Carlos Dominguez III to produce money at all cost.

By end of April, Finance Assistant Secretary Tony Lambino estimated that there will be around P600 billion ($11.85 billion) cash available for the coronavirus war chest. But it will be funded mostly by loans.

So far, the Philippine government has borrowed P300 billion ($5.92 billion) from the Bangko Sentral ng Pilipinas; secured a $3-million grant (P152 million) from the Asian Development Bank mostly for medical supplies; and fast-tracked a $100-million loan (P5.07 billion) from World Bank for health services.

Lambino added that some P50 to P100 billion ($1 billion to $2 billion) will be still be borrowed from international creditors by the end of the month.

At the rate that the Philippines is getting loan deals, economic managers estimate a fiscal deficit of at least 5.3% of the projected GDP, sources told Rappler. This is a jump from 2019’s budget shortfall of 3.55% – which was already above the target of 3.2% – due to the infrastructure push under the Build, Build, Build program.

For the rest of the expenditures, it’s still unclear what the economic managers’ strategy will be. That, of course, is dependent on the government’s overarching plan to fight the pandemic, the specific details of which, we have yet to see.

How much is the budget?

Right now, there’s no “real” breakdown of the available budget for the coronavirus responses yet.

There are 3 laws that give the President the legal cover to identify funding to fight the pandemic: RA 11469 or the Bayanihan to Heal as One Act, the 2020 General Appropriations Act, and RA 11464 which extended the validity of the 2019 budget until December 31, 2020.

To put it in perspective, there are existing allocations under the 2019 and 2020 budgets that can be used for the coronavirus, which can be augmented as needed, as allowed by the special budget powers under the Bayanihan law.

These are the 4 special budget powers under the Bayanihan law, and how the President has used them so far:

Section 4(v) – “Discontinuing” or doing away with the orignal purpose of any program in the executive branch and the GOCCs, under the 2019 and 2020 budgets, for allotments that are yet to be “obligated” or committed for payment. This act would generate savings, and will be used to augment the war chest.

Section 4(v) is quite a mouthful, but to easily grasp it, here’s a scenario: imagine that your mother gave you P1,000 ($20) and a list to buy two days’ worth of groceries. Your mother had already indicated in the list the amount of each item and how many you needed to buy. There’s chicken, vegetables, cleaning items, medicine, and chips, among others.

But just before you get to the cashier, your mother sent you an SMS, asking you to take out the chips, and instead use the money supposedly for that to buy more medicine. That’s how Section 4(v) works, to put it simply.

What this means: The President has the power to tap into allotments that are unobligated or not yet committed for payment under the executive and GOCCs.

The total budget under the executive branch amounts to P2.045 trillion ($40.37 billion) for 2019, and P2.29 trillion ($45.22 billion) for 2020. The special purpose funds, meanwhile, amounts to a total of P633.45 billion ($12.52 billion) for 2019, and P467.90 billion ($9.25 billion) for 2020. But of these total amounts, we don’t know yet how much has been obligated per agency.

Because of that, the Department of Budget and Management has two options in implementing this provision:

  • Check the unreleased funds per agency in DBM records
  • Tap into the unobligated funds or amounts not yet committed for payment from agencies

So far, the DBM has taken the route of checking unreleased funds against agency budgets, as it was the “easier” thing to do, a source told Rappler. Historically, getting the obligation report from agencies is difficult, more so now due to the work-from-home arrangement in the public sector.

As of the second Malacañang report to Congress on April 6, the DBM has identified P189.82-billion ($3.75 billion) in unreleased appropriations, the bulk of which came from capital outlay worth P160.42 billion ($3.17 billion).

The total amount included P4.209 billion ($83.25 million) from the Budgetary Support to Government Corporations (BSGC) under the lump-sum special purpose funds. The rest included items that were placed under “For Later Release” (FLR), or the congressional insertions in the 2020 budget, which were flagged by Senator Panfilo Lacson in December 2019.

Of the P189.82 billion, the budget department has recently released P100 billion to the Department of Social Welfare and Development as part of the funding measure for the emergency cash aid to 18 million low-income families.

Some P30.824 billion ($609.47 million), which will be used as financial assistance to local governments, was also sourced from the P189.82 billion. The grant, dubbed as “Bayanihan Grant to Cities and Municipalities,” came directly from the infrastructure projects of the Department of Public Works and Highways under FLR.

Section 4(w) – Using all unspent or unreleased balance in the lump-sum special purpose funds, as well as those from funds that were sourced from revenues.

In Malacañang’s first report to Congress, the DBM said that unreleased appropriations under the special purpose funds are estimated at P372.719 billion ($7.37 billion). But the initial estimate that can be tapped included some P209.907 billion ($4.15 billion), lodged under the BSGC and Allocation to Local Government Units.

When the second report came out, there was no mention of these amounts as funds to be tapped for the coronavirus, save for the P4.209 billion under BSGC.

According to the second report, the Land Bank of the Philippines has also remitted to the BTr a total of P22.03 billion ($435.23 million) worth of cash from the following:

  • P12.13 billion ($239.65 million) cash balances from various national government agencies.
  • P4.4 billion ($86.92 million) total unused balance from Letter of Credit procured by the DOH and the Armed Forces of the Philippines. It refers to unspent loans by these agencies.
  • P5.5 billion ($108.66 million) unused Unconditional Cash Transfer funds.

Section 4(x) – Reallocating savings in the executive branch under the 2020 budget.

Section 4(x), meanwhile, is similar to Section 4(v), except that it directly concerns savings. Officially, savings is defined under Section 65 of the General Provisions of the 2020 budget as the “portion or balances of any released appropriations in this act which have not been obligated.”

In short, savings in the 2020 appropriations law is the remaining amount from released funds that will no longer be committed for payment. Take as an example the grocery scenario mentioned earlier. Upon reaching the cashier, you realize you have change worth P100 ($2). The P100-change can be used to buy more medicine under this provision.

What this means: The President can declare savings and use that to deal with the coronavirus. According to an April 6 memorandum of Executive Secretary Salvador Medialdea, the President declared P30.824 billion worth of funds under DPWH’s FLR as savings, which will be used for the Bayanihan Grant to Cities and Municipalities.

Section 4(y) – Allocating cash, funds, investments, including unspent or unreleased subsidies and transfers held by the GOCCs or any national government agency.

Section 4(y) includes the dividends remitted in advance to the BTr by the GOCCs. Republic Act 7656 requires GOCCs to remit at least half of their annual income as dividends in the form of either cash, stock, or property to the national government.

What this means: Several GOCCs had already remitted their dividends, in advance. As of April 1, the Department of Finance has already collected P78.64 billion ($1.55 billion) from 12 GOCCs.

The BTr had also certified on March 31, a total of P101.642 billion ($2 billion) to fund the social amelioration package of the government.

Cash coming from the BTr, as well as those remitted to the bureau, will be used to fund the budget items to fight the pandemic.

Existing funds

What’s clear, so far, is that some P189.82 billion is the initial available budget, as far as the Bayanihan to Heal as One Act is concerned. Apart from this, government agencies dealing with the effects of the pandemic also reach into their existing funds.

Under the March 30 report, the DBM said that the health, social welfare, and labor departments should continue to tap their existing released allotment for their coronavirus reponse activities:

These amounts, of course, do not include the regular operating expenses of public hospitals and salaries of government personnel. The DOH, including the Philippine Health Insurance Corporation, has a combined budget of P165.92 billion ($3.27 billion) in 2019, and P172.37 billion ($3.40 billion) in 2020.

Take note as well that quick response funds (QRF) can be replenished from the National Disaster Risk Reduction Fund (NDRRMF) once they get depleted. The total NDRRMF amounted to P20 billion ($394.75 million) in 2019 and P16 billion ($315.8 million) in 2020. Some P500 million ($9.89 million) had been released to previously replenish the DOH’s QRF.

Similarly, the Contingent Fund can also be tapped as a back-up budget. It amounts to P13 billion ($256.6 million) each for the 2019 and 2020 budgets.

As of April 3, the budget department had also released some P5.18 billion ($102.24 million) to 5 departments, sourced from their existing projects that were placed under FLR:

Meanwhile, some agencies took it upon themselves to allocate money from their existing funds, to support activities related to the battle against the coronavirus:

  • Environmental Management Bureau – allocated P2.352 million ($46.42 million) from its Climate Change support activities for coronavirus programs and projects.
  • National Transmission Corporation – spent its available unused funds for the purchase of personal protective equipment for frontliners, thermal scanners, relief goods; donated P3 million ($59,217) to the Philippine Red Cross.
  • Philippine Veterans Affairs Office – used its funds for the following:
    • Packages for its 451 personnel amounting to P1.041 million ($20,548);
    • P10,000 for the Philippine Resilience Corporation’s Project Ugnayan in support of its project to feed 1 million poor families;
    • P20,000 ($394) to the University of the Philippines Vanguard Foundation, a civic-military organization, to help feed stranded UP-Diliman students.

As we’ve seen, the budget is not really a problem in this pandemic. 

RA 11469 has given the President enough elbow room to easily augment funding for coronavirus measures. (READ: Congress reins in Duterte’s special budget powers)

What the Philippine government needs is cold cash. If needed, the national government can borrow right away, but at a higher cost. So we need to be prudent, Lambino cautioned. 

“We have to be prudent. Dapat talagang makatulong ito doon sa mga nangangailangan dahil (These should be allocated to those that need immediate funding because) some of these are credit line. Either we will be paying for this in the [near] future, or future generations will be carrying the need to repay,” Lambino said. – Rappler.com

*US$1 = P50.66

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Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.