Continuing Prudent Fiscal Management

Effective and efficient delivery of public services and capability to defend against forces that seek to destroy it, do not alone make a strong republic.

We also must derive strength from the wise use of our resources, the stability of our fiscal position, and the maintenance of sound fiscal and monetary policies that encourage investments, promote the growth of free enterprise and, foster the expansion and distribution of economic gains.

Government funds are not a bottomless well. It has its limits. That being the case, we cannot forever go on spending in deficit. We have to contain our budget deficit, bring it down to more manageable levels, and eventually wipe it out and balance our budget by FY 2006.

With a determined and conscious effort, we have trimmed our current deficit to P147 billion in FY 2001 vis-à-vis what could have been P245 billion. We aim to limit the deficit-to-GDP ratio to 3.3 percent next year from 4.1 percent when we started in 2001.

We acknowledge the great demand to spend for diverse needs. But we must control our appetite to what will be to our best interests—spending within our means.

We have estimated our revenue collections for 2003 at P640.7 billion representing 14.9 percent of GDP. This projection is only 7.5 percent higher than collections this year. The tax effort will only be 13.5 percent of GDP, the same rate as that last year. Of this amount, P465.6 billion will come from collections of the Bureau of Internal Revenue (BIR), and P106.8 billion from the Bureau of Customs (BOC). Non-tax revenues, on the other hand, are projected to reach P60.7 billion, or 1.4 percent of GDP.

The budget proposal next year is as good as our success in collecting the targeted revenues. We took pains in crafting a revenue estimate that is conservative, yet responsive to the developments in the economy.

Our revenue program continues to be our biggest challenge, with BIR and Customs performance as the best measure of our ability to maintain fiscal health.

We will not allow these two major revenue generating agencies to have excuses for not collecting their targets. We will support their reform initiatives, but we will demand good performance in return.

With a budget deficit projected at P142.1 billion next year, the government plans to borrow P324.9 billion from domestic and foreign sources. We will calibrate our borrowings next year in tune with market conditions and sentiments in order for us to avail of the best financing terms available.

We will continue to maximize availments from Official Development Assistance sources by prioritizing ODA-funded projects in our implementation list.

We will refrain from activities that will tend to crowd out domestic credit demand.

With this level of borrowings, we will pay off some P188.2 billion of debt principal and fully cover the budget deficit.