THE national government's budget deficit in July narrowed to P121.2 billion from last year's shortfall of P140.2 billion, the Bureau of the Treasury said.

According to the Treasury, the budget deficit in July this year, which was down by 13.57 percent year-on-year, resulted from the growth in revenue collection outpacing the increase in government expenditures.

Revenues in July this year rose by 9.21 percent to reach P256.1 billion from P234.5 billion in the same month last year.

Most of the revenues for the month came from tax sources at P229.8 billion and the rest, from non-tax sources at P26.3 billion.

Expenditures in the same month stood at P377.3 billion, inching up by 0.69 percent from P374.7 billion in July 2020.

The Treasury attributed the "modest increase" in government expenditures" to higher personnel services expenditures and infrastructure outlays which were offset by the one-off Social Amelioration Program implemented in July last year.

Apart from this, the timing of subsidy releases to the Philippine Health Insurance Corporation and National Housing Authority also weighed down on the growth of disbursements for the period.

7-month deficit widens

Despite the narrower budget deficit in July, the cumulative budget deficit for the seven-month period widened to P837.3 billion, up by 19.5 percent compared to P700.6 billion in the same period in 2020.

Government expenditures from January to July this year jumped by 8.18 percent to P2.58 trillion from last year's P2.39 trillion.

Meanwhile, revenues in the seven-month period went up by 3.47 percent to P1.75 trillion from P1.69 trillion in the same period last year.

The bulk of revenues came from tax sources—90 percent or P1.573 trillion of the total revenue collection; the balance of P173.2 billion came from non-tax sources.

For the first semester, the Treasury said the deficit-to-GDP ratio rose to 7.86 percent from last year's level of 6.53 percent as expenditure growth outpaced revenue collection.

In 2020, the government's budget deficit more than doubled to a record-high 7.6 percent of GDP or P1.37 trillion, from only P660.2 billion or 3.4 percent of GDP in 2019.

The Department of Finance sees the government returning to its pre-pandemic budget deficit and debt levels as early as 2024 or by 2025.

From a record-low debt-to-GDP ratio of 39.6 percent in 2019, the country's debt as a share of the economy surged to a 14-year-high of 54.6 percent in 2020, as the government ramped up borrowings to fund the Covid-19 pandemic response war chest.

Finance Secretary Carlos Dominguez III said they are working on a fiscal consolidation plan to bring down the government's debt and budget deficit levels as a share of the economy.

Image courtesy of Nonoy Lacza

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