MANILA - The Philippine government now aims to wipe out the fiscal gap by 2013.

On Friday, the inter-agency Development Budget Coordination Committee (DBCC) announced that it will propose to Congress a P1.54 trillion budget for 2010. This will translate to a budget deficit of P233.4 billion or 2.8% of GDP, at the high end of earlier indications.

"We are trying to bring ourselves back on track to having a balanced budget," Budget Secretary Rolando Andaya told Reuters. "We also want to avoid handing over to the next administration an unsustainable spending."

The government abandoned its goal of balancing the budget last year so it could spend more on infrastructure and social services to help shield the economy from the global downturn. Its budget deficit is set to hit a record P250 billion, or 3.2% of GDP, this year.

"We are on our way to (economic) recovery, although there is still a slight increase in infrastructure spending, we also expect the private sector to pitch in," Andaya said.

Andaya said the proposed 2010 spending plan assumed the economy would expand by 2.6 to 3.6%, faster than this year's growth target of 0.8 to1.8%.

The economy expanded 0.4% in the first quarter of the year from a year earlier, the weakest since 1998.

Rosalia de Leon, head of the Finance department's international finance group, said on Thursday the government has yet to finalize its borrowing plan next year but its foreign debt may rise from the initial plan of around $1.5 billion.

Philippine sovereign bond prices dipped on Friday in reaction to the comments.

Finance officials said last month the government is studying possibly prefunding part of next year's overseas borrowing needs ahead of general elections in May. - with Reuters