MEDIUM-TERM

FISCAL PROGRAM

Secretary Emilia T. Boncodin

Department of Budget and Management
Presentation to GOCCs/GFIs
September 15, 2004
Heroes Hall, Malacañang
POLICY OBJECTIVES
 Balance the national government
budget in 6 years
 Reduce CPSD to GDP ratio to 3% in 6
years
 Reduce Public Sector Debt to GDP
ratio to 90% in 6 years
National Government Fiscal Position
1986-2004
(Percent of GDP)
Aquino Ramos Estrada Arroyo
22.0
Expenditure Revenue
20.0

18.0

16.0

14.0

12.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Expenditure 18.1 17.6 17 18.6 20.2 19.8 19.1 19.1 18.9 18.4 18.6 19.4 19.2 19.8 19.3 19.6 19.6 19.2 18.4
Revenue 13 15.1 14.1 16.5 16.8 17.7 18 17.7 19.9 18.9 18.9 19.4 17.4 16.1 15.3 15.3 14.1 14.6 14.8
National Government Deficit
1986-2004
(percent of GDP)
Aquino Ramos Estrada Arroyo
2.0

1.0

0.0

-1.0

-2.0

-3.0

-4.0

-5.0

-6.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Def icit -5.1 -2.4 -2.9 -2.1 -3.5 -2.1 -1.2 -1.5 1.0 0.6 0.3 0.1 -1.9 -3.8 -4.0 -4.0 -5.3 -4.6 -4.2
GOCCs Deficit (14 MNFGCs)
1986-2004

P billion
Aquino Ramos Estrada Arroyo
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
-70.0
-80.0
-90.0
-100.0
-110.0
-120.0
-130.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Deficit -6.8 0.3 2.9 -3.0 -19.1 -7.4 -10.7 -25.6 -9.7 -1.3 -11.2 -17.2 -38.0 -4.6 -19.2 -24.5 -46.4 -65.3 -125.
 PUBLIC SECTOR DEBT TO GDP
RATIO
200

150 132.91 135.6

130.4
123.16 121.5
115.15 113.7
110 110.75
103.01

100
78.03
71.1
63.9 65.49 65.67
60.8 59.64
53.2 55.65 56.14

50

0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*

PUBLIC SECTOR DEBT NG DEBT

Source: BTr, NSCB * As of Sept. 2003

ACTION PLAN
Deficit Targets, 2004-2010
(Percent of GDP)

8
6.7
7 6
6 6.0
4.6
5 3.9
4
4.2 3
3 3.6
2 2.9
2.1 3.0
1 1.2 0
0 0.2
2004 2005 2006 2007 2008 2009 2010
NG Deficit CPSD
Debt Targets, 2003-2010
(percent of GDP)

160
135.6
140
120
100
90
80
60 78 58
40
20
0
2003 2004 2005 2006 2007 2008 2009 2010

NG Debt PS Debt
SPECIFIC MEASURES:
Measures to Address Fiscal Problem
1. National Government
 Revenues
 Expenditures
 Debt Management

2. Government-owned and/or Controlled

Corporations/Government Financial Institutions
 Rate Adjustment
 Rationalization
 Streamlining
 Compensation
 Privatization/Outsourcing
 Debt Guarantee
3. Local Government Units
 IRA Adjustment
REVENUE PROGRAM
NG REVENUES, 1986-2004
(percent of GDP)

18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

TAX NON-TAX
TAX REVENUES,1986-2004
Ratio to GDP

14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
1994

1998
1986

1987

1988
1989

1990
1991

1992

1993

1995

1996
1997

1999
2000

2001
2002

2003

2004
BIR BOC OTHER OFFICES
NG REVENUES, 2004-2010
(Percent of GDP)

20 17.9 18.1 18.5

16.7 16.9
16.2
14.5 17.24 17.64
15 15.7
16.78
15.3
14.6
12.8
10

5
1.7 1.4
1.6 1.2 1.1 0.9 0.9

0
2004 2005 2006 2007 2008 2009 2010
Tax Non Tax Total Revenues
TAX REVENUES, 2004-2010
(Percent of GDP)

16.0 14.0
13.4 13.7
14.0 11.7 12.3 12.6

12.0 10.3

10.0

8.0
6.0
2.4 3.0 3.3 3.4 3.5
4.0 2.8 2.9

2.0
0.2 0.2 0.2 0.1 0.1 0.1 0.1
0.0
2004 2005 2006 2007 2008 2009 2010

BIR BOC Other Offices

ACTION PLAN: Revenues
A. Improving Administrative Efficiency
1. Periodic adjustment of fees and charges
2. Improve enforcement mechanisms to increase collection efficiency:
BIR: Computerization/Automation of operating system;
Enhancement of Audit Program;
Intensified enforcement procedures;
Conduct taxpayer compliance verification drive.
BOC: Modernization of information systems and technology;
Create Task Force Anti-Smuggling;
Strengthening of Internal Audit Service;
Purchase of Container X-rays for ports
3. Rate Adjustment

B. Privatization
ACTION PLAN: Revenues
B. Proposed Legislative Measures
Php B
1. Gross income tax system for
corporation and self employed 16.8
2. Indexation of the excise tax on
sin products 7.0
3. Increase excise tax on
petroleum products 29.7
4. Rationalize fiscal incentives 5.0
ACTION PLAN: Revenues
Php B

5. General Tax Amnesty with Submission

of SAL na
6. Lateral Attrition System na
7. Franchise Tax on Telecommunications
to replace VAT 5.0
8. Two-Step Increase in the VAT rate 19.9
EXPENDITURES
NG Expenditures to GDP, Philippines
25.0

20.0

15.0

10.0

5.0

0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Expenditure Capital Outlays

Source: DBM
BUDGET FLEXIBILITY MARGINS
OTHERS
13%

PS
INFRA
33%
6%

OTHERS
23% IRA
16%
PS
37%

INFRA INTEREST
PS
OTHERS 10% 32%
27%
29%

IRA
I NTEREST
2004
14%
16%

INFRA
9% 1997
I RA INTEREST
7% 28%

1992
Personal Services, Selected Asian
Countries
(Percent of GDP)

7.0 6.6
5.9
6.0
5.2 5.3
5.0

4.0

3.0
1.8
2.0

1.0

0.0
Philippines Indonesia 1997 Malaysia 1997 Thailand 2001 Singapore
2001 2001
Personal Services, Selected Asian
Countries
(Percent of Tax Collections)

60

50

40

30

20

10

0
1995 1996 1997 1998 1999 2000 2001
Philippines 35.3 36.8 41.9 47.6 47.0 49.0 48.8
Thailand 31.5 30.5 33.7 42.2 45.2 42.6 40.9
Singapore 29.2 29.5 30.5 34.3 32.9 31.0 34.1

Philippines Thailand Singapore

Capital Outlays, Selected Asian
Countries
(Percent of GDP)
12

10

0
1995 2001

Philippines 3.7 2.9

Malaysia 4.7 10.2
Thailand 5.4 4.4
Singapore 3.7 5.8
Vietnam 5.3 8.1

Philippines Malaysia Thailand Singapore Vietnam

Expenditure Targets, 2004-2010
(Percent of GDP)

7.0

6.0

5.0

4.0

3.0

2.0
Interest Payments
1.0 Personal Services
Capital Outlays
0.0
2004 2005 2006 2007 2008 2009 2010

Interest Payments 5.8 5.9 5.6 5.1 4.7 4.2 3.7

Personal Services 6.2 5.7 5.5 5.3 5.1 5.0 4.8
Capital Outlays 2.0 2.5 2.7 3.0 3.4 3.9 4.0
 ACTION PLAN: Expenditures

Administrative Measures

A. Issuance of Economy Measures

 Administrative Order to be issued by
PGMA directing cost-reduction
program on utilities, supplies, travel,
etc.
Action Plan…Administrative: Expenditures

B. Rationalization of Personal Services

1. Objectives
 Deactivation of functions no longer relevant
 Consolidation/rationalization of duplicating
functions
 Strengthening of important functions
2. Mechanics
 Voluntary but time-bound separation
opportunity but with option to (1) remain in
government service; or (2) be separated
with incentives
Action Plan…Administrative: Expenditures
C. Improvement of Management and Control of
GOCCs
 EO to improve governance of GOCCs/Other
Government Corporate Entities (OGCEs)
 Improve operational responsibility of supervising
departments/agencies over GOCCs/OGCEs attached to
them
 Impose moratorium on establishment of subsidiary GOCCs
pending assessment of operations of all subsidiary GOCCs
 Privatization/Outsourcing
Action Plan...Administrative: Expenditures
D. Fully implement devolution provision of
the LGU Code
 MFC to be primary conduit for funds
(except IRA and mandated shares to
LGUs)
E. Increase social safety net program within
the budget
F. Transfer to the General Fund of all
balances of dormant accounts
 ACTION PLAN: Expenditures
Legislative Measures

A. Enactment of Fiscal Responsibility

Bill
 Reduce public debt to more
manageable levels by imposing
debt cap
 No new expenditure without new
revenue measure
Action Plan...Legislative: Expenditures

B. Rationalize government retirement

and pension schemes
 Suspend RA 1616: All retirement paid
by GSIS
 Select veterans’ benefits that can be
reasonably funded
 Make pension benefits commensurate
to premium contributions
Action Plan...Legislative: Expenditures

C. Rationalize government compensation

system
 Simplify position classification
 Simplify compensation structure and
implement performance-based
compensation system
 Rationalize compensation of board
members and corporate officers
D. Remove automatic guarantee
provisions in certain GOCCs
DEBT MANAGEMENT
ACTION PLAN:Debt Management

1. Bond exchange to lengthen debt

maturity
2. Make more use of ODAs than
commercial borrowings
3. Debt cap
4. Limit borrowings to high priority
import projects