President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad


To FINEX members and friends,

PRESIDENT’S REPORT
November 2017 Issue

We are now on the final stretch of 2017. This year has been one of the busiest and exciting for both FINEX and the country.

Earlier this month, our country was once again placed in the limelight as we hosted this year’s ASEAN Summit. The summit provided us to showcase what our country can share to the world and the creativity of the Filipino people. Indeed, the recent hosting of the ASEAN summit placed our country

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The 2018 national budget Part 1
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Santiago F. Dumlao Jr.By Santiago F. Dumlao Jr.

BUSINESS MIRROR (Free Enterprise)
October 17, 2017

The 2018 national budget

Finex Free Enterprise is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Wednesday & Friday in BusinessMirror, banking & finance Section.

It is at this time of the calendar year when the national budget for the next fiscal year (2018, in this case) approaches the last stages of finalization in Congress, in time for final enactment before the start of the budget year. We can now say with some certainty that the National Expenditure Program proposed by the Executive department to Congress will be, in magnitude and substance, what will come out as the General Appropriations Act for 2018.

In this series of “Budget Articles”, we propose to call attention to some major elements and components of the 2018 budget. The intention is to get the reader to be curious, inquisitive and be better informed of how the government is spending money. It is not too well recognized that the national budget broadly influences our collective welfare, and directs how each Filipino will share in the national patrimony, for now and for later. So we shall proceed to make a series of short stories on the budget, drawing from the Department of Budget and Management (DBM) “2018 Peoples Proposed Budget” print publication. The DBM, after all, “highly encourages the reproduction, copying, printing and/or dissemination of this publication or parts thereof” to promote its wide accessibility.

To put the examination or evaluation of the budget in context, it is apropos to start with “The 2018 Budget: Priorities and Policy Directions,” which DBM’s publication puts at center stage, and we quote:

“The FY 2018 National Budget aims to enhance the capability of the government and its people to effect the reforms that are crucial to achieve its goals of inclusive growth, high-trust resilient society and globally competitive knowledge economy. Anchored on the Philippine Development Plan [PDP] 2017-2022, the country’s blue print in the medium term, the budget targets to achieve the transformation that will ensure real and lasting change, guided by the following policy directions and priorities:

Credible and disciplined fiscal policy. Maintain the budget deficit to a manageable 3 percent of GDP, while pursuing positive reforms to generate the needed revenues. These will include improvements in tax laws and nontax bases, as well as governance reforms.

Fiscal space focused on equitable progress and social order. Increase outlays in infrastructure development and social services, ensuring improvements in quality and quantity, and targeting emerging growth centers and lagging communities, particularly in disaster- and conflict-affected areas.

Accelerated infrastructure development. The “Build, Build, Build” program aims to increase government spending from 5 percent to 7 percent of GDP.

Commitment to transparency, participation and accountability. Agencies will be held responsible and accountable for the proper implementation of their budgets and encouraged to involve the people in the selection and monitoring of the use of government funds.

Support for and enhancement of partnerships with local governments, especially in the more isolated and depressed areas, to ensure sustainable and inclusive development.

Restructuring of the FY 2018 agency budget using the Program Expenditure Classification approach, which shifts the classification and focus of government programs/projects/activities from output-based to results-based programs, thereby clearly reflecting the agencies’ policies and priorities.

Strengthening the implementation of the Two-Tier Budgeting Approach, which separates the review of the ongoing programs and projects from the new and expanded programs. Under Tier 2, proposals are evaluated based on implementation readiness, agency absorptive capacity, consistency or proposals with the priorities stated in the Budget Priorities Framework, and evidence of agency planning.”

A statement like this is meaningful because it gives coherence to understanding the “why” of every element of spending in the budget, and provides a useful framework for analysis by serious advocates of budgetary reform who keep on monitoring performance.

A noteworthy change in the DBM’s budget presentation is its decision to adopt the Classification of the Functions of Government (Cofog), developed by the Organisation for Economic Co-operation and Development. This system classifies government spending into 10 more specific expenditure purposes, thus presenting a more identifiable range of activities being served. Before, budget expenditures were lumped in just five general classifications: social services, economic services, general public services, defense and debt burden. Now, the budget dimension by sector (following Cofog) is more meaningful and understandable.

1. General public services (P1.393 billion)
2. Education (P704 billion)
3. Economic affairs (P660 billion)
4. Social protection (P475 billion)
5. Public order and safety (P211 billion)
6. Health (P166 billion)
7. Defense (P121 billion)
8. Housing and community amenities (P7 billion)
9. Environmental protection (P3 billion)
10. Recreation, culture and religion (P3.7 billion)


(Amounts appropriated in the 2018 budget.)

This Cofog classification has significant implications. It allows the central budgetary authorities a wide perspective of the various types of services the nation requires, and a comprehensive framework for balancing or rebalancing budget allocations among competing demands for spending. This disaggregation of needs is extremely useful in formulating the budget and in matching funds availability to funds requirements. As a planning tool, it is an improvement.

Being an international standard, Cofog also allows comparisons with other jurisdictions. Not that budget allocations should be the same country to country, but comparisons help raise questions of “why the difference” and aids in the constant evaluation of equitable allocations: Are we spending enough, for example. This Cofog approach also is useful to apply to local government budget formulation and is strongly suggested to local subnational development councils.

Not the least, this Cofog classification is of great use for Civil Service Organizations (CSOs) engaged in budgetary-reform advocacies because the framework provides convenient opportunities for zeroing in on key items under each sector/spending classification, and for identifying accountability responsibilities.

Santiago F. Dumlao Jr.

He is the current Secretary-General of (ACRAA) Association of Credit Rating Agencies in Asia. FINEX past president. https://businessmirror.com.ph/the-2018-national-budget/

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