The Market Monitor Minding the Nation's Business
President Aquino’s economic managers have put a positive spin on an otherwise damning report of the International Monetary Fund (IMF) on the administration’s budgeting innovations that cited the lack of transparency in the use of public funds.
A top official even went to the extent of saying the IMF report was an “indicator” of fiscal transparency under the Aquino administration.
The Department of Budget and Management (DBM) said the “favorable review” in the IMF Fiscal Transparency Evaluation (FTE) would propel the administration’s goal of instituting sustainable public financial management (PFM) reforms for greater transparency and accountability.
The IMF paper, titled “Philippines: Fiscal Transparency Evaluation,” is clearly critical of the Aquino administration’s “budget credibility,” saying it is undermined by the complexity and large flexibility of the annual budget framework.”
The annual budget law, the report added, has become an imperfect indicator of the government’s priorities for resource allocation and service delivery, as budget outturns differ noticeably from the budget law.
“While this has not affected macroeconomic and fiscal-policy outcomes over the last few years, this could rapidly change should the political or external environment become less favorable,” the IMF said.
“Planning and costing of projects haven’t been strong, especially for multiyear projects. Clearly, the planning and costing could be improved,” IMF Resident Representative for the Philippines Shanakah Jayanath Peiris said.
Aquino’s economic managers conceded, though, that the IMF “emphasized the need to close the remaining gaps in the Aquino administration’s strategy to fulfill the 36 principles of the IMF’s Fiscal Transparency Code [FTC].”
They added that the FTE report also issued a number of recommendations that would address such gaps in the country’s transparency practices.
“Some of these items have already been addressed via reporting improvements across government. For example, agencies now prepare their own final Annual Financial Reports [AFRs] for auditing by the Commission on Audit. Meanwhile, the DOF [Department of Finance] has already released its Tax Expenditure Report [TER] for 2011 early this year, which addresses the issue of transparency in income tax incentives and other tax expenditures,” a DBM statement said.
“Through daang matuwid [straight path], we sought to reform public fiscal management and bring greater transparency and accountability to it. The IMF is a valuable partner in our fiscal reform efforts, and working with them and other stakeholders has al- lowed us to cover the gaps in our PFM reform road map,” Budget Secretary Florencio “Butch” Abad said.
“At the same time, however, we have to resolve some longstanding issues in our fiscal management practices. From the DBM’s end, for example, we need to strengthen budget planning so that the resulting national budget can properly support our growth and development targets.
There’s a lot of work to be done as well in making sure that agencies spend their allocations quickly and efficiently,” Abad added.
Scored well
Abad claimed that, based on the IMF report, the Aquino administration scored well among the 36 indicators, advanced in seven indicators, good in 16, and basic (minimum) in eight.
“These scores range across the three pillars of the FTC, including fiscal reporting, fiscal forecasting and budgeting, and fiscal risk-analysis management,” Abad said.
Abad also said the DBM, the DOF and the National Economic and Development Authority (Neda) pushed a number of reforms that helped the country secure the “high score” in the IMF report.
“Expenditure reforms include Performance-In-formed Budgeting, Bottom-Up Budgeting [BUB], and the timely release of the GAA,” he said.
As reported earlier, the BUB, since renamed Grassroots Participatory Budgeting Program (GPBP) is deemed by critics to be a pork-barrel clone. It has been alloted P20.8 billion in this year’s budget and is likely to get a bit more when it becomes a mainstay in the national budget
The GPBP is also a brainchild of Abad, like the Disbursement Acceleration Program (DAP), and most of its funds are under the control of the Department of the Interior and Local Governent, headed by Sec. Mar Roxas, presumprtive standard-bearer of the ruling Liberal Party (LP) coalition in next year’s elections. Abad is the chief campaign strategist of the LP.
“The IMF’s report not only validates the Aquino administration’s good governance agenda. It also tells us that we’re headed in the right direction with our fiscal reform efforts. And as we continue to fine-tune our public financial management sys- tem, we can look forward to better government services and further improvements to our economy,” Abad concurred.
Finance Secretary Cesar Purisima took the spin on the report overboard when he said it was indicator of fiscal transparency under the Aquino administration. “Unprecedented fiscal transparency under this administration’s core belief that ‘good governance is good economics’ has been a bedrock of our sound fiscal strength.
“We continue to strive for openness, as public finance reform allows us to better enhance the management of every hard-earned taxpayer peso,” he said.
“As a priority of the government, enhancing fiscal transparency stands as one of four pillars in our Asia-Pacific Economic Cooperation [Apec] Finance Ministers’ Process [FMP] Cebu Action Plan [CAP] for inclusive and sustainable economies,” Purisima said.
“We are encouraged by this report as we continue to lead the push for openness across the Asia-Pacific. An open government opens opportunities for a better performing economy,” Purisima said.
The issues raised in the IMF report were similar to those the Supreme Court cited in its ruling on the DAP, which is supposedly an economic stimulus program, but which the High Court ruled was created through unconstitutional acts of Malacañang, mainly the juggling of funds from the budget.