Where did the money for stimulus spending go?

This was the key question monetary officials are asking after the national government reported an insignificant 0.4 percent annual growth domestic product growth in the first quarter. Last week, government statistician Romulo Virola's "We are teetering on the brink of recession" comment, which was based on contractions in the leading economic indicators, hugged the headlines.

The monetary officials, who manage the flow of funds within the financial system, said they are doing their job. The Bangko Sentral ng Pilipinas monetary body has already lowered its key policy rates by a cumulative 175 basis points since December. The lowering of interest rates, a tool by monetary officials to stimulate the economy, has encouraged banks, even amid tighter credit standards, to continue lending.

In fact, according to BSP deputy governor Nestor Espenilla Jr., the commercial and even rural banks posted double-digit lending growth rates in the first three months--a feat considering banks were previously focused on their treasury operations and not on their traditional or core lending activities.

Time and again, BSP governor Amando Tetangco said monetary policies is not enough to jerk the economy to keep it growing despite the external shocks. Tetangco had said it is important that their efforts are complemented by their peers, who are in charge of the fiscal policies--the balancing of funds that enter (tax collections) and leave (government spending) the national coffers.

The Arroyo administration has earlier announced a P330 billion stimulus package, called the Economic Recovery Program (ERP), to help stimulate the economy by providing jobs through frontloaded spending in infrastructure and socio-economic project, and by targeted dole-out programs for the poor.

The anemic economic growth--or the lack of it--has led BSP deputy governor Diwa Guinigundo to wonder, "Did we really spend on those projects as originally scheduled and programmed?"

What pump-priming?

The ERP was supposed to be the umbrella program of the government to pump-prime the economy and to precisely save the country from the "recession" fears the country is gripped with now.

In the press conference on the first quarter performance of the economy last week, Economic Planning Secretary Ralph Recto explained that the legislative bodies' delayed approval of the national budget for 2009 was a factor. (The budget was approved only in March.)

Yet, Recto himself had said these ERP-identified projects are "shovel ready," meaning these high impact project are quickly rolled out.

Thus, BSP's Guinigundo posed two questions: (1) Were those programmed spending actually spent, and (2) Why was there no--or little--desired impact?

"We need to look into the cash position of the National Government (NG) to indeed verify whether the disbursements from the budget department were actually received and spent by local governments and other NG line agencies," Guinigundo said. "In short, we need to ensure at this point that the additional budgetary allocation was actually spent."

The BSP official noted that, from January to April, the national government has posted a 16-percent increase in spending from the same period last year. "Did we really spend on those projects as originally scheduled and programmed?"

According to Guinigundo, the spending behavior of the government in general would have to be examined to find out how the funds were being used up and whether they were going into the target programs with the highest multiplier effects.

Economic managers are set to meet on Thursday to decide on whether to change or not the targets for growth, fiscal position, and other indicators.