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FOR the
first time on Tuesday, President Arroyo, speaking to
reporters who covered her official trip to Hong Kong,
displayed a hint of flexibility in her zeal to attain a
balanced budget—a zeal so intense she would have the
government do it two years ahead of the original
schedule.
The
“small” budget deficit this year held out as concession,
it seems, to the people, would be justified, she said,
if the US slowdown becomes “more prolonged” and the
resulting impact—read: misery for many ordinary
people—would be so obvious the State would have no
choice but allow for some economic priming and certain
temporary subsidies of various forms.
Apparently signaling her singular focus on the deficit,
though, she reminded reporters that “as of now,” it
continues to aim for a balanced budget in 2008.
The
softening in mood is partly traceable, it seems, to a
corresponding softening in signals from those she aims
to please the most: the international community. The
President said the country’s creditors and the
international financial community have indicated they
would not be averse to a budget deficit this year if
there is increased tax collection and continued fiscal
prudence.
“As of
now, our goal is still a balanced budget on the
assumption that the US slowdown will be short. . . . But
we have to watch the situation. If the slowdown is more
prolonged, and we discussed this with the creditors and
the international financial community, they can
understand, they will understand a small deficit as long
as they see an increase in our tax effort,” she said.
It’s
easy to see the sources of the softening. On Wednesday
the former head of the Asian Development Bank (ADB)
Philippines office, Thomas Crouch, was reported saying
that despite the President’s firm resolve to meet the
balanced-budget goal this year, balancing the budget
does not have to happen in 2008.
Crouch,
now ADB deputy director general for Southeast Asia, said
that as long as the Philippines is able to balance its
budget and the economic team is firm on meeting this
commitment, that is enough. In short, we don’t have to
die trying to attain this in 2008.
“If
there are very sound reasons for increasing the
expenditure in public infrastructure and the social
sector, as long as debt occurred in parallel with
continuous upward trend in tax revenues, for example,
then there is no reason to balance the budget and maybe
encourage a larger deficit than planned in 2008,” Crouch
said in the open forum after the launch of the bank’s
flagship publication, the Asian Development Outlook for
2008.
Even
before Crouch spoke, another influential voice had
chided the administration for this hard-on over a
balanced budget. No less than the former central bank
governor Jose Cuisia Jr. said the government cannot
justify putting the balanced-budget goal over a very
intense need to stimulate more economic activity and
boost public services, if the times demand the latter.
The brownie points from an international gallery simply
won’t be worth it, said Cuisia, if one’s real
constituency, the people, are miserable.
Guess
what? A day after this paper put that statement of
Cuisia on its front page, Palace officials asserted,
rather strongly, that no matter what happens, the
balanced-budget goal stays. And that’s that.
Now,
everyone knows why Philippine officials have
traditionally been obsessed with this goal: balancing
the budget is considered by many investors and analysts
the “litmus test” for the Philippines and puts at stake
the credibility of the economic team.
Even
from the time of the first post-Edsa administration,
Cabinet officials would debate to death the merits of
setting the key economic and financial goals according
to the dictates of foreign tutors, investors and
credit-rating agencies.
We
recall one particularly heated debate when certain
International Monetary Fund (IMF) officials insisted on
pegging GDP growth to very conservative levels because
of the obsession with keeping deficits to minimal
levels, and then-socioeconomic planning secretary Solita
Collas Monsod blurted out in exasperation, “Yes, we all
want to keep deficits low, but if you are obsessed with
cutting growth targets, you can’t do it on the backs of
the Filipino people,” and then motioned with her hand,
making an imaginary stab in someone’s back.
Then, it
was the IMF tutors. The past few years, the
administration has obsessed itself with getting approval
from credit-rating agencies, which they occasionally
belittle when these issue statements that are not so
flattering.
The
point is, any responsible government should exercise
certain flexibility in setting its goals, and not hitch
these to some rigid benchmarks set by outsiders.
Especially not when, for instance, supposedly sharp
credit-rating agencies dismally fumbled with the ball
and failed to ring the alarm bells when the credit
crisis that started in the United States, and that now
roils financial markets everywhere, had not yet fully
erupted.
In
finally relenting and showing some flexibility on the
balanced-budget-goal-or else, the President told
reporters in Hong Kong that the government will conduct
a “periodic review” of “how the slowdown in the US
economy is growing, and that is the time when, if
necessary, we will make adjustments on our balanced-
budget targeting.”
Then she
added: in any case, “even if a decision is toward a
small deficit, there will have to be an increase in the
tax effort and spending must remain prudent. But, as of
now, at this point in time, the goal is still a balanced
budget.”
Today,
it’s rice and oil that people fret about. Tomorrow,
it’ll be bread and other basics in the food basket; not
to mention the fares and medicine and health care that
even now are unaffordable to many. Balanced? Sure. But
at the rate we’re going, many will be dead from trying
to have that. |
