IF you took a survey, most Filipinos would probably say that the government collects revenues and then uses the money any way it wants with little or no oversight.
However, according to a comprehensive report—the Philippines: Fiscal Transparency Evaluation (PFTE)—conducted by the International Monetary Fund (IMF), the government is doing a good job of spending and accounting for its expenditures.
The PFTE was conducted in 2014, and the report was released last week. The objective was to assess the Philippines’s fiscal reporting, forecasting and budgeting, and fiscal-risks analysis and management practices against the standards set by the IMF’s draft Fiscal Transparency Code.
In addition to looking at practices in budgeting and spending, the auditing and public reporting of financial information were evaluated all the way down to the local government unit (LGU) level.
There were several interesting takeaways in reading the 100-page report.
The Philippine national government budget is very flexible in that monies budgeted are not always spent and not always spent the way they were budgeted. While this is certainly a red flag for graft and corruption, the IMF sees it also as necessary, particularly in light of how funds have to be reallocated due to our natural disasters. This was not so much on the national level as on the LGU level. But this does make it difficult to ensure that projects are completed as budgeted.
For all the talk of how important national government spending is, the PFTE quantifies it as 14 percent of gross domestic product (GDP), with the general government, including the LGUs, accounting for 17 percent of economic activity. That amount is big enough to be important, but not so large as to be critical for growth.
The evaluation against the 36 principles of the IMF’s draft Fiscal Transparency Code is broadly favorable, and particular kudos were given to the job that the Commission on Audit (COA) does. But here, the IMF found an area for improvement. If you compare the government to a private corporation, each individual department submits its own fiscal data for audit by the COA. Presumably, each department has done an “unofficial” audit. But the COA acts similar to a corporation’s “internal auditor.” The IMF suggests the need for an “external auditor” to check the large data of the COA. This makes some sense to have another set of eyes looking at the numbers once they had been finalized.
The overall fiscal position of the government looks good. The PFTE: “The Philippines has achieved a positive net worth position of 2 percent of GDP over the years, which is stronger than in many advanced economies.” In other words, is the national government taking more from the economy than it is giving back? By comparison, the US government “net worth” is a “net loss” equal to 100 percent of the GDP. So much for big government.
There were several areas that need improving. And, of course, we know there is too much waste, misallocation and corruption. But, overall, the Philippine government is slowly moving in the right direction with its fiscal management.