The appointment of former budget secretary Benjamin E. Diokno as governor of the Bangko Sentral ng Pilipinas (BSP) leaves a void in the Duterte Cabinet and economic team.
The question is, who is best suited to be the next budget secretary? What traits should he or she possess?
I argue that the next budget chief should have both technical competence and political savvy. He must also embody integrity in public service.
Role of budget secretary
The DBM secretary is not only in charge of the wise and efficient allocation of public resources through the crafting of the annual national budget, but also holds the financial carrot and stick to forward the administration's governance and reform agenda. He/she will identify and weigh the priorities of the government, considering that funding is limited.
For instance, should more money be channeled to Build, Build, Build or to local government projects? What programs should take a backseat so more investments could be made in education, healthcare and other social services?
The DBM secretary also chairs the Development Budget Coordination Committee (DBCC), composed of members from the Department of Finance, National Economic and Development Authority, the Office of the President, and the BSP as a resource institution.
Together, they set the all-important economic and fiscal targets like inflation, economic growth, revenue collection, government spending, and the level of the fiscal deficit. In fact, the DBM secretary would be an economic manager more than a political emissary to Congress. This suggests the preference for a technocrat who is independent and can withstand political pressures.
It will surely help that the DBM as an institution is a well-oiled machine, staffed with experienced civil servants and career executives. Nevertheless, the DBM and budget reform agenda will only go as far as the leader will take them.
Issues at hand
Having laid down the qualifications of an ideal DBM chief, here are some of the concerns that the next budget secretary will have to grapple with:
1) Reenacted budget and new budget cycle. This is the 3rd month that government is operating under a reenacted budget. As of this writing, the legislative has yet to transmit the enrolled copy of the General Appropriations bill to Malacañang.
Before being signed into law, the President may also use his line-item veto power for the budget, as authorized by the Constitution. Hopefully, the 2019 General Appropriations Act (GAA) will be out by this month.
But this stresses the need for urgency. The next secretary must devise a catch-up plan and coordinate with implementing agencies to speed up project implementation. It is too early to estimate foregone government disbursements due to a partially reenacted budget, but the risks remain on the downside.
Consider also that the DBM has begun preparing the 2020 National Expenditure Program. In the next six months, the DBM secretary will be looking at an approved 2019 budget and the proposed 2020 budget for Congress to scrutinize – all while still adjusting to his new post.
2) Averting underspending. As mentioned, the DBM secretary is also an economic manager who oversees state spending. He/she will also have big shoes to fill after the government finally reversed 12 straight years of underspending in fiscal year 2018.
Underspending happens when government fails to disburse funds compared to its fiscal program. In simple terms, disbursements refer to actual payment of cash (from the Treasury) for government programs and projects.
This is the most accurate gauge of government spending, not appropriations (what Congress authorizes the government to spend in a given time period) or obligations (just finding a contractor for a project even if it has yet to be implemented and payment has yet to be made). Disbursements are also used to measure the fiscal deficit (which refers to government revenues less disbursements).
At a time when government spending is rising steadily as a percentage of gross domestic product (GDP), and given plans of the present administration to Build, Build, Build (see Figure 1), it is necessary for the next DBM chief to sustain this performance.
For a developing country with pressing investment needs, underspending is a wasted opportunity.
Government fiscal performance as percent of GDP (2008-2018)
3) Cash-based budgeting. Which then brings us to cash-based budgeting, one of the reforms introduced by former budget secretary Diokno. This scheme essentially limits the validity of funds from two years to just one year, thus changing incentives.
At the same time, funds will be considered "spent" if and only if they have been disbursed (not just obligated) with payment being allowed up to the first quarter of the following year.
The gradual shift to cash-based budgeting is precisely why underspending was reversed last year (see Figures 2 and 3).
Hopefully, the next DBM secretary will appreciate the importance of this reform and continue it.
Government spending performance (2008-2018)
Government underspending rates (2008-2018)
For now, Undersecretary Janet B. Abuel has been appointed Acting Secretary of the DBM, but it remains to be seen if the President will name a successor in the near future (or after the May 2019 elections, with a ban on new appointments kicking in later this month).
As a bar topnotcher, holder of multiple master’s degrees, and with decades of experience at the DBM under her belt, Atty Abuel surely has what it takes to lead this important institution. She is competent, apolitical, seasoned, and honest. I would appoint her as budget secretary if I were President, but I'm not.
For the sake of policy continuity, it would be best for the DBM to be led by a technocrat and not a politician. Reversing the budget and fiscal gains that have been realized in recent years would prove inimical to the Philippine economy, and consequently, the Filipino people.
So back to the question: who is the next budget secretary? It's quite futile to speculate at this point, but let’s cross our fingers that the President makes the best choice possible. – Rappler.com
Adrian G. Glova holds a Bachelor's Degree in Economics (magna cum laude) from the UP School of Economics and is now pursuing his Masters of Science degree in Statistics at the UP School of Statistics. He was an executive assistant to Secretary Benjamin E. Diokno at the DBM for 2.5 years. The author's views do not reflect the views of the Department of Budget and Management.