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Reenacted Budget per se is Not Bad

The Philippine government is effectively operating on a reenacted budget in January 2019 after the House of Representatives and the Senate failed to pass the proposed 2019 General Appropriations Act last year.


While I hope that Congress and Malacañang will soon resolve the budget impasse, I believe the situation is not as worrisome as in the United States, where some 800,000 federal workers were affected by the government shutdown.


The situation here is also not as serious as some people would like to exaggerate. In the Philippines, a reenacted budget means the government still has money to support its programs and projects and pay for the salary of state employees based on the previous year’s program. Second, it is not the first time it happened in the country. Third, there is still enough time to pass the new budget and implement it by the second quarter of 2019.


I remember that the national government operated on reenacted budgets three times under the Arroyo presidency, and yet the economy still grew by an average of 4.3 percent annually in her nine-year term.  The change in the House leadership last year partly explains the delay in the approval of the budget.  It is an inevitable result of the change of leadership in Congress and I don’t think the effect on the economy will be significant.


It cannot be compared to the US government shutdown, stemming from US Congress's opposition to President Donald J. Trump’s demand for federal funding of the US-Mexico border wall.


In the Philippines, the approval of the budget is like a game of patintero between the Executive and Legislative departments, which requires careful maneuvering by both sides. When former President Gloria Macapagal-Arroyo became Speaker in July last year, she and other House leaders apparently preferred the existing “obligation-based” framework to the “cash-based” system proposed by the Department of Budget and Management.


The budget proposal prepared by the DBM has been clearly supported by the previous House leadership, and it is obviou s that the new Congress leaders have other ideas on how the budget should be programmed. To me, this is not surprising and is to be expected.


Despite the deadlock, I’m sure it will be resolved soon. For the meantime, there are enough funds under the recycled 2018 budget of P3.767 trillion to support government projects and programs in the first quarter of 2019.  Last year’s budget is actually P10 billion higher than the proposed P3.757-trillion spending plan this year.


To mitigate the impact of the budget impasse, Budget Secretary Benjamin E. Diokno issued Budget Circular 2019-01, which authorizes government agencies to spend a quarter of their 2018 budget allocations in the first quarter.


While the start of new infrastructure projects might be delayed a bit, the majority of public works would not be affected. I don’t think contractors would stop their construction
activities just because of a minor delay in payments.


What will likely happen is that the government would operate on the reenacted budget for a month or two until the new budget is passed in February.


As the Senate resumed sessions on January 14, it would likely focus on the immediate enactment of the budget measure. Once passed and signed into law, the budget bill would be implemented by the second quarter this year, putting the government on track of its program.


Despite the slight implementation gap in new infrastructure projects, I believe the Duterte administration’s centerpiece “Build, Build, Build” infrastructure program would take off this year, generating jobs in the construction sector and stirring domestic demand for construction materials.


An infrastructure-driven policy would enable the Philippines to sustain annual growth of 7 percent to 8 percent in the medium term and join the ranks of upper-middle-income economies in the next decade.


In the meantime, let us not worry too much about the budget impasse because it would not lead to a government shutdown.