National government spending reached its peak so far for the year at P328.1 billion in July 2018, representing an increase of P83.0 billion, or 34%, from the same period last year. The spectacular rise in spending was due to infrastructure and other capital outlays as well as subsidies to government corporations. For the first seven months of the year, disbursements have reached P1.932 trillion, higher by P355.7 billion or 23%, year-on-year.     “The fiscal numbers in July 2018 confirm progress in our efforts to reduce underspending and instill public financial reforms,” said Budget and Management Secretary Benjamin E. Diokno. “Government spending is intact, and this means that our people will enjoy the benefits of government projects sooner, such as school buildings and hospitals for the poor, and road and mass transit projects for commuters,” he added.

Drivers of Spending Growth in July 2018

Infrastructure and other capital outlays owing to the Build Build Build Program continue to boost government spending as it reached P84.5 billion, surging by P36.1 billion or 75% compared to July 2017.

The implementation of infrastructure projects by the Department of Public Works and Highways (DPWH) continue to pace infrastructure disbursements. In particular, these include nationwide road construction, improvement, and widening projects; thePasig-Marikina River Channel Improvement Project;and flood control, drainage, and dike improvement and rehabilitation projects.

Capital acquisition through the Armed Forces of the Philippines (AFP) Modernization Program (e.g.,Frigate Acquisition Project and Civil Engineering Equipment Acquisition Project); and capital outlay projects (e.g., procurement of machinery, aircraft, and aircraft equipment) of the Department of Transportation—Philippine Coast Guard (DOTr-PCG) also contributed to higher infrastructure and other capital spending.

Meanwhile, subsidies to government corporations hit P32.5 billion, nearly double or 93% higher than in July of the previous year. This is primarily due to the P27.7 billion health insurance premiums of indigents enrolled under theNational Health Insurance Programof the Philippine Health Insurance Corporation (PHIC), irrigation projects worth P2.0 billion under the National Irrigation Administration (NIA), and another P2.0 billion for cash downloads to the beneficiaries of the Tax Reform Cash Transfer Project under the LandBank.

         Another driver of spending growth was the sustained increase in Personnel Services owing to higher salaries of civilian government employees by virtue of the third tranche of compensation adjustment, and higher salaries of military and uniformed personnel authorized by Joint Resolution No. 1, s. 2018. Personnel Services reached P70.6 billion in July 2018, increasing by P16.9 billion or 32%, year-on-year.

Status of Allotment Releases

         As of end-July 2018, allotment releases reached P3.447 trillion, which is equivalent to 92% of the P3.767 trillion obligation program for the year. The rate of allotment release as share of the obligation program is faster this year compared to the 87% rate recorded in end-July 2017. The speedier release of allotments is crucial in ensuring that funds are obligated before December 31, 2018. With the shift to an Annual Cash-Based Appropriations in 2019, the swift release of allotments will enable agencies to disburse their funds within the fiscal year, up to the Extended Payment Period (EPP).  

For the month of July alone, allotment releases amounted to P32.0 billion, composed largely of the following expenditures:

         The balance of unreleased allotments, amounting to P319.8 billion, largely come from Special Purpose Funds (P153.4 billion) and agency-specific budgets (P137.5 billion). These allotments are expected to be released in the coming months, for obligation by line agencies, consistent with the one-year validity of appropriations in the 2018 General Appropriations Act (GAA). In fact, preliminary data by the DBM show that P53.0 billion worth of allotments have already been issued in August 2018.

         “We are doing our best to fast-track the release and disbursement of funds for public programs and projects,” said DBM Secretary Diokno. “We maintain our projection that underspending will be eliminated under our watch. Looking ahead, the shift to an annual cash-based system will further enhance spending efficiency as performance will be measured on concrete outputs and not just on contracts awarded,” he concluded.

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