Department of Finance

Sovereign wealth fund under consideration

That was the banner story of today’s BusinessWorld online.

Here is a direct quote from the article:

Economic managers are studying the possibility of setting up a Philippine sovereign wealth fund to maximize returns from the country’s foreign exchange holdings.
“As I understand, the national government is conducting a study on the possible operations of a sovereign wealth fund,” central bank Governor Amando M. Tetangco, Jr. said at the sidelines of yesterday’s Philippine Investment Forum.

Finance Secretary Cesar V. Purisima confirmed that the plan was being considered, although he said the review remained in the preliminary stages.

“We haven’t brought up the matter with [President Benigno S. C. Aquino III] yet. So far, it’s just look, see, study and evaluate,” Mr. Purisima said.

As readers of this space will be aware, I have been harping on this issue for over two years now. Before anyone in the upper echelons of policy making, whether fiscal or monetary, or within academia were even contemplating it, I had flagged the possibility here. The following is a compilation of the previous articles I have posted on the issue
Early this year, I developed a policy paper on this topic, which I enclose below

Fruits of Our Labour by Doy Santos

It’s good to see that after more than two years of writing and engaging with the issue, the idea is finally being seriously considered by both the Department of Finance and the Bangko Sentral as confirmed by today’s news item . Even more surprising is how prominent economists are now supporting the principle of establishing a sovereign wealth fund for the Philippines. If this should be included among the administration’s priority bills for the 16th Congress, it would be timely as the country is expected to receive investment grade status by the end of the year.

The Surplus Fetish

Both the economics and the politics of current fiscal policy seem flawed.

Yesterday the Department of Finance trumpeted the news that the government in April posted the largest fiscal surplus in 25 years. The PDI reports today that

The Aquino administration posted a budget surplus of P26.26 billion in April… more than 10 times the P2.6-billion surplus a year ago, Finance Secretary Cesar V. Purisima announced Monday.

The fiscal performance for the month of April brought the record for the first four months to a surplus of P61 million, documents from the Bureau of the Treasury showed.

Good news, right? To use a popular phrase, the government seems to be “living within its means.” This is certainly the impression DoF wants to create. After last year’s poor fiscal performance led to a 6.3% of GDP blowout, Finance officials seem fixated on reining in the budget once again this year. So this should come as a bit of a respite from the constant talk about deficits for them.

Unfortunately when one digs deeper into the figures, a very unappealing picture emerges. Let us start off with the January to March figures for 2011. According to the department’s official website, expenditures for the first quarter declined by 12.7% compared to the same period in 2010 (Php349 B in 2011 v Php400 B in 2010).

You might argue that this Php 50 billion “underspend” was due to the elections last year and so you might be excused for thinking that costs would recede to normal levels in a non-election year. So what were the programmed expenditures for the first quarter of 2011? The answer is Php431 billion. That means that the real underspend amounts to Php82 billion!

Now why should that be shocking, you might ask. Well, consider it from the point of view of program recipients not receiving their promised benefits or public infrastructure projects that did not get funded in the first quarter. Budget experts will tell you that the non-rainy months in the first semester are critical for infrastructure projects. This is especially true this year with the early rains coming in May.

If a government is unable to spend its budget in a timely manner, it speaks unfavorably of its abilities in fiscal management. This government credited itself with getting its first budget approved by Congress early prior to the start of the year. It had plenty of room to get its ducks lined up to see spending out the door. One would expect a new administration to be quite anxious to see this happen to differentiate itself from the previous one.

Unfortunately, that didn’t happen.

From reform budget to deformed budget

The government got itself “back in the black” by contracting expenditures (experiencing “strong yet below-target revenues”). The government under-spent 18.8% of its programmed budget and incurred a much smaller deficit in the first quarter amounting to a mere Php26.2 billion down from the expected Php112 billion (note: that is why it’s January to April surplus was 61 million after posting a surplus of 26.26 billion during the fourth month).

Was this to paint a rosy picture for:

  • the bond market?
  • credit rating agencies?
  • the public at large?
  • all of the above?

One wonders at this point, what has happened to the “reform” budget? Has it turned into the “de-formed” budget? This lies at the heart of its “credible commitment” problem.

Indeed for the so-called economic managers in charge of steering the course not only of the budget but the economy at large, does this approach seem rational? Or have they been overtaken by their passions, influenced by the fetish for surpluses?

This not only makes for bad policy, it consists of poor politics as well. Not only will the government not contribute to the economic and social infrastructure needed for a thriving economy, if it seeks to pass new revenue measures next year, it will be undermined by the false impression created that these new measures are not urgently needed.

The public once accustomed to hearing that the government is in surplus will find it hard to accept the need for new taxes. Indeed, it wouldn’t make sense to the ordinary man on the street reading these news reports.

Once again, the story the government intends to weave will somehow get it entangled down the track because it does not portray the true picture. This is not what you might call “strategic communication”. If it wants the public to become apprised of the real situation concerning the structural deficit in our budget, it needs to allow spending to commence as it should.

By accepting poor policy and misreading the politics, the benign one’s fetish with surpluses could prove detrimental to the country in the end.

Finance Secretary Purisima: there is an effort to discredit me

Philippine Finance Secretary Cesar Purisima tweeted that there is an effort to discredit him. The secretary submitted his statement of assets and liabilities, which included his income tax returns, and mandatory clearances from the Bureau of Internal revenue. This is required under Philippine law.

“I understand that a malicious party has zeroed in on the increase in my assets from 2006 to 2009, and is asking why the increase is bigger than the income declared in my income tax return,” @cvp1960 tweeted.

“The simple answer is,” Secretary Purisima wrote, “Passive income such as interest which is not included in the income tax return. In fact, this is the very reason why the BIR issued RR-2-2011 so as to capture passive income, but had it suspended because of complaints from many parties.”

RR-2-2011 is the Annual Information Return, which was supposed to be required of individuals with income exceeding 500,000 pesos.

[blackbirdpie url=http://twitter.com/CVP1960/status/63127932469653504]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63128409215209472″]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63128957863723009″]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63129301314322432″]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63132803239383040″]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63133484063014912″]
[blackbirdpie url=”http://twitter.com/CVP1960/status/63133737361227776″]

DOF charges former Congressman Pichay in takeover of Express Savings Banc, Inc.

Finance Secretary Cesar Purisima filed a criminal complaint at the Department of Justice(DOJ) against 5 members of the Board of Trustees of the Local Water Utilities Administration(LWUA), a government-owned and controlled corporation(GOCC), in connection with the acquisition of shares of stocks of a troubled thrift bank.

The 35-page complaint named former congressman and Arroyo administration ally Prospero A. Pichay, Jr., Renato S. Velasco, Susana Dumlao Vargas, Bonifacio Mario M. Pena, Sr. and Daniel Landingin as respondents in a case for violations of the Manual of Regulations for Banks in relation to the Central Bank Act, Anti-Graft and Corrupt Practices Act and the Revised Penal Code for their alleged “direct and willful participation in facilitating the highly irregular and anomalous takeover and acquisition of the shares of stock of Express Savings Banc, Inc.(EXSBI), a financially troubled bank undergoing rehabilitation.”

EXSBI is a thrift bank based in Cabuyao, Laguna with an authorized capital stock of P100-million divided into one million common shares, according to the Department of Finance(DOF).

Read the full article at ABS-CBN News.

Bureau of Treasury— January to September 2010 deficit better than expected

An October 21, 2010 report prepared by the Bureau of Treasury, Department of Finance

via gov.ph

January to September Fiscal Deficit at P 259.8 Billion

Better Than Program by P13.9 Billion


21 October 2010, Manila, Philippines: The January to September fiscal deficit of the National Government reached P259.8 billion, P13.9 billion lower than the programmed ceiling of P273.7 billion. The over performance can be attributed to the P54.2 billion lower spending partly on account of the savings in interest payments due to lower borrowing cost.

Revenue Performance

Revenue collections reached P894.7 billion for the first three quarters. It grew by 7% compared to the same period of last year’s P839.8 billion. The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) registered a growth of 9% and 15%, respectively, for the first three quarters compared to same period last year. Actual collections for the period January to September were recorded at P607.3 billion for BIR and P191.0 billion for BOC. Actual cash collections for BIR and BOC for the period January to September were significantly higher than its levels in 2009. From January to September, cash collections for BIR was at P598.9 billion or 12.0% higher than last year, while cash collections for BOC was at P170.2 billion or 18.0% higher than 2009. Likewise, the Bureau of the Treasury income was recorded at P45.5 billion while other offices, registered an income of P50.9 billion.

Revenue collections reached P91.9 billion for the month of September. Actual collections for the month were recorded at P61.0 billion and P20.2 billion for BIR and BOC, respectively. Bureau of the Treasury income and collections from other offices for the month was recorded at P5.3 billion and P5.4 billion, respectively.

Expenditures

Actual disbursements for the first three quarters amounted to P1,154.5 billion, 7% higher than the comparable disbursements in 2009. Excluding interest payments, total disbursements increased by 8%.  Actual disbursements in September amounted to P123.6 billion.

Primary Surplus/(Deficit)

Netting out the interest payments in the expenditures, the National Government recorded a primary surplus for the month of September amounting to P0.1 billion. Cumulatively, the primary deficit reached to P15.2 billion for January to September.

Fiscal Performance

January to September 2010

(In Billion Pesos)

September

Actual

Percent

Growth

2010/2009

2009 2010
Surplus/(Deficit) (27.5) (31.7) (15.2)
Revenues 100.7 91.9 (8.7)
Cash 97.6 90.0 (7.8)
Non-Cash 3.1 1.9 (37.6)
Expenditures 128.2 123.6 (3.6)
Cash 125.2 121.7 (2.8)
Non-Cash 3.1 1.9 (37.6)
Jan-SeptActual 2010Q1-Q3

Program

Program vs Actual PercentGrowth

2010/2009

2009 2010
Surplus/(Deficit) (237.5) (259.8) (273.7) 13.9 9.4
Revenues 839.8 894.7 935.1 (40.3) 6.5
Cash 796.1 865.5 898.8 (33.3) 8.7
Non-Cash 43.7 29.2 36.2 (7.1) (33.2)
Expenditures 1,077.3 1,154.5 1,208.7 (54.2) 7.2
Cash 1,033.7 1,125.3 1,172.5 (47.2) 8.9
Non-Cash 43.7 29.2 36.2 (7.1) (33.2)

National Government Revenues

January to September 2010

(In Billion Pesos)

Sept

Actual

Percent

Growth

2010/2009

2009 2010
Revenues 100.7 91.9 (8.7)
BIR 56.2 61.0 8.4
Cash 53.8 59.8 11.3
Non-Cash 2.5 1.2 (53.7)
BOC 18.3 20.2 10.8
Cash 17.7 19.5 10.1
Non-Cash 0.6 0.8 32.9
BTr 6.0 5.3 (12.6)
Other Offices 20.2 5.4 (73.1)
Jan-Sept

Actual

2010

Q1-Q3

Program

Program vs Percent

Growth

2010/2009

2009 2010 Actual
Revenues 839.8 894.7 935.1 (40.4) 6.5
BIR 557.0 607.3 620.5 (13.2) 9.0
Cash 534.5 598.9 615.1 (16.2) 12.0
Non-Cash 22.5 8.4 5.5 2.9 (62.5)
BOC 165.4 191.0 210.2 (19.2) 15.5
Cash 144.2 170.2 179.4 (9.2) 18.0
Non-Cash 21.2 20.7 30.8 (10.0) (2.1)
BTr 52.2 45.5 45.2 0.4 (12.8)
Other Offices 65.1 50.9 59.2 (8.3) (21.9)

National Government Expenditures

January-September 2010

(In Billion Pesos)

SeptemberActual PercentGrowth

2010/2009

2009 2010
Expenditures 128.2 123.6 (3.6)
Int. Payments 31.8 31.8 (0.1)
Others 96.4 91.8 (4.8)
Jan-Sept

Actual

2010

Q1-Q3

Program

Program vs Percent

Growth

2010/2009

2009 2010 Actual
Expenditures 1,077.3 1,154.5 1,208.7 (54.2) 7.2
Int. Payments 235.3 244.5 256.0 (11.4) 3.9
Others 842.1 910.0 952.8 (42.8) 8.1

NG Primary Surplus/(Deficit)

January-September 2010

(In Billion Pesos)

SeptemberActual PercentGrowth

2010/2009

2009 2010
Primary Surplus/ (Deficit) 4.3 0.1 (96.8)
Revenues 100.7 91.9 (8.7)
Expenditures (Net of IP) 96.4 91.8 (4.8)
Jan-SeptActual 2010Q1-Q3

Program

Program vs PercentGrowth

2010/2009

2009 2010 Actual
Primary Surplus/ (Deficit) (2.3) (15.2) (17.7) 2.4 576.4
Revenues 839.8 894.7 935.1 (40.4) 6.5
Expenditures (Net of IP) 842.1 910.0 952.8 (42.8) 8.1

Easing hunger in the 3rd quarter 2010

Briefer prepared by the National Economic Development Authority, October 21, 2010

A. Based on the Third Quarter 2010 Social Weather Survey, the proportion of families experiencing involuntary hunger declined to 15.9 percent in September 2010 compared to 21.1 percent in June 2010 and 17.5 percent in September 2009. Some indicators for third quarter 2010 that show the same trends or may have contributed to this easing of hunger are as follows:

1. Data from the July 2010 Labor Force Survey

Source: National Statistics Office

a. Compared to July 2009, employment level, or the number of people who are employed, in July 2010 grew moderately by 2.2 percent to reach 36.3 million from 35.5 million.

b. Net employment creation was higher in July 2010, reaching 777,000 compared to 414,000 in April 2010, although lower than the 915,000 net employment created in July 2009. Note that the Comprehensive Livelihood and Emergency Employment Program (CLEEP) started implementation in May 2009, with CLEEP in most government agencies running until December 2009.

c. In the agriculture sector where majority of the poor are, net employment generation reached 376,00 in July 2010, a rebound from a net employment loss of 803,000 in April 2010 and net employment loss of 162,000 in July 2009.  Employment losses in agriculture were recorded due to typhoons in 2009 and continuing El Nino in first half of 2010.

d. In terms of unemployment rate, this improved to 6.9 percent in July 2010 compared to 8.0 percent in April 2010 and 7.6 percent in July 2009.

2. Minimum wage
Source: National Wages and Productivity Commission, DOLE

Report as of 7 October 2010

Seven regions out of the 17 regions in the country issued wage orders granting increases in minimum wage as follows:

a. National Capital Region (NCR) – Increased minimum wage by P22.00 on May 31, 2010, effective on July 01, 2010;

b. Western Visayas (Region 6) – Increased minimum wage by P15.00 July 19, 2010, effective on August 12, 2010

c. Central Visayas  (Region 7) – Increased minimum wage by P18.00 on August 12, 2010, effective September 1, 2010.

d. Zamboanga Peninsula (Region 9) – Increased minimum wage by P15.00 and integrated the P15.00 COLA to basic pay on August 16, 2010, effective September 9, 2010.

e. Northern Mindanao (Region 10) – The wage order issued on July 23, 2010 integrated the P12.00 COLA to basic pay effective August 22, 2010 and increased minimum wage by P13.00 effective October 1, 2010.

f. Davao Region (Region 11) – Increased minimum wage by P21.00 on July 23, 2010, effective September 1, 2010.

g. Caraga  (Region 13) – Increased minimum wage by P10.00 and integrated the P10.00 COLA to basic pay on July 28, 2010, effective August 25, 2010.

3. Wage Goods

Source: Bureau of Agricultural Statistics, Department of Agriculture

Wage goods generally declined in the third quarter of 2010 compared to the previous quarter.  Prices declined for rice, pork, dressed chicken, bangus, tilapia, and corngrain. [See resource.]

B. In terms of programs, the continuing implementation of the Pantawid Pamilyang Pilipino Program (4Ps) may have also contributed to ease hunger despite the termination of the programs Food-for- School Program and the Tindahan Natin.

source: gov.ph

Finance Dept to join Facebook, Twitter

Finance Dept to join Facebook, Twitter
GMANews.TV

To help go after tax cheats and smugglers, the Philippine Department of Finance (DOF) is looking to the public for assistance by signing up for social networking sites Twitter and Facebook.

On Thursday, Finance Sec. Cesar Purisima said the project is in cooperation with the Bureau of Internal Revenue and the Bureau of Customs.

Coming soon: crowdsourcing leads

“We will be launching it very soon. It is being developed,” Purisima said at a press briefing at the Department of Justice, where BIR Commissioner Kim Hacinto-Henares filed a tax evasion complaint against pawnshop chain owner William Villarica.

He said that on the upcoming Facebook page, the public can post photos of luxury cars, plush homes, and other properties of alleged tax evaders and smugglers.

“With their phones that have cameras, they can take photos of a nice car, a nice house, or a nice watch, so we can follow the lead… We will investigate then we’ll deliver to the Department of Justice,” said Purisima.

Social media and the government

The move comes in the wake of President Benigno Aquino III’s announcement in a press briefing last week that his administration will use social media as “feedback mechanisms” to get information directly from the public.

The DOF is not the first Philippine government agency to set up an active social media presence. Earlier this month, the Supreme Court also launched its own Twiter account, @kortesuprema. The account is currently deactivated, however, court administrator and spokeperson Jose Midas Marquez said that it is being fixed. – TJD, GMANews.TV

Clef two-factor authentication