MANILA - Lower-than-programmed government spending due to delayed infrastructure projects pushed the country's budget deficit below the target ceiling in the first 6 months of the year, the Finance Department said Monday.

Finance Secretary Margarito Teves announced in a press conference that the government booked a deficit of P30.2 billion in June, bringing the total budget shortfall for the first semester to P153.4 billion. This was 752.2 percent higher than the P18 billion shortfall recorded in the same period last year, but lower than the programmed deficit of P155.1 billion for the period.

Teves said the government outperformed its fiscal deficit goal despite the continued fall in tax collections. However, this was only because it failed to meet the level of spending it was targeting to help keep the economy afloat.

Data showed that government expenditures rose 18.9 percent to P699.1 billion from January to June year-on-year, but were P37.4 billion lower than the programmed spending of P736.5 billion. On the other hand, total revenues, which consisted mainly of tax collections, fell 4.3 percent to P545.7 billion on year, and were P35.7 billion short of the P581.4-billion target for the period.

Budget Secretary Rolando Andaya told reporters that the "underspending" in the first half could be traced to the delay in the implementation of big-ticket infrastructure projects.

He said the government is expected to fast-track infrastructure projects like farm-to-market roads and school buildings within the second half to catch up with programmed expenditures for the whole year.

Andaya said the government also saved P14.1 billion in interest payments as it only paid P144.7 billion in the first 6 months due largely to lower borrowing cost.

Weak BIR, BOC collections

Both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), the country's two main revenue-generating agencies, fell short of targets in the first semester of the year.

The tax effort of the BIR retreated by 5.6 percent to P375.6 billion in January to June this year, and was P24.1 billion below its target of P388.4 billion, while that of the BOC plunged 10.4 percent to P104.8 billion or P20.1 billion short of its P124.9-billion goal.

For the month of June alone, BIR collections went up by 11.7 percent to P60.4 billion from P54.1 billion last year, while those of customs dropped 18.5 percent to P20.3 billion from P24.9 billion.

Teves said the tax bureaus are hoping to collect P30 billion in additional revenues from the implementation of several revenue measures this year.

On track

Even with the full impact of the global economic crisis, the finance chief is confident that the government would be able to achieve its revised budget deficit ceiling of P250 billion or 3.2% of gross domestic product (GDP) this year.

"Given the fiscal performance in the first six months of the year, we are hoping that we will remain on track with out deficit program," he stressed.

The Philippines has thrice revised upward its budget deficit ceiling this year: from P102 billion to P177.2 billion, then to P199.2 billion, then to P250 billion.

Budget Secretary Rolando Andaya, for his part, assured that in line with a goal to balance the budget by 2013, the government will not allow the deficit to reach 4% of GDP this year.

The government expects to incur a budget deficit of P95 billion in the second half of the year. Revenues are expected to reach P657.8 billion from July to December while expenditures are expected to amount to P752.7 billion.

Lower 2010 deficit

When asked if a global recovery could help the government narrow its fiscal shortfall next year, Andaya said: "Yes, also fiscal discipline."

Andaya said the government is considering a budget deficit of 2.5 to 2.8% of GDP in 2010, narrower than the 3.2% estimate for 2009.

Earlier, the government said it may register a deficit of P173 billion or $3.63 billion next year.

Borrowings

To finance this year's budget gap, National Treasurer Roberto Tan said the government would source about 68% of its total borrowing requirements from domestic creditors through the issuance of treasury bills and bonds while 32 percent would come from foreign sources such as development aid and commercial debts.

The Philippines has so far raised $2.25 billion from the international capital market following the issuance of 10-year global-denominated bonds last January and early this month.

Next year, the country is eyeing to prefund its 2010 overseas borrowing requirements ahead of the national elections in May, according to Tan.

"There is elections coming up and we don't know the conditions of the market," he told reporters.

Rosalia de Leon, head of the Finance department's international finance group, said prefunding the government's 2010 borrowing needs was currently being considered, with a Samurai bond issue "still an option." With a report from Reuters