THE national government’s budget deficit swelled by 90 percent in August from a year ago as slower economic activity weakened revenue collections while spending climbed.
The Bureau of the Treasury reported last Thursday that the shortfall between revenues collected and the amount spent by the government widened to P161.3 billion in August from P84.8 billion in the same month last year.
The gap comes after revenues waned by 1.85 percent to P346 billion from P352.5 billion, as non-tax collections dropped and tax revenue growth slowed.
Non-tax revenues fell by 35.59 percent year-on-year to P13.7 billion from P21.3 billion due to lower Treasury income and collections from other offices.
Collections of the Bureau of Internal Revenue (BIR), the main tax-collecting agency, inched down by 0.70 percent to P248.4 billion from P250.1 billion a year earlier due to higher tax refunds paid during the month.
Revenue take of the Bureau of Customs (BOC), meanwhile, grew by 4.15 percent year-on-year to P80.7 billion from P77.4 billion.
John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, told the BusinessMirror that weaker revenue collection ‘may reflect subdued economic activity, which affects income and consumption-related tax collections, alongside possible timing differences in tax and non-tax receipts.’
On the spending side, expenditures rose by 16 percent to P507.3 billion from last year’s spending of P437.3 billion.
The Treasury attributed the increase partly to the P58.6-billion budgetary support to the Philippine Health Insurance Corp. for the health insurance premiums of those enrolled under the National Health Insurance Program.
Higher national tax allotment shares for local government units also contributed to the increase in August disbursements.
Interest payments, likewise, increased by 3.98 percent to P65.6 billion from P63.1 billion.
Jonathan A. Ravelas, senior adviser at Reyes Tacandong and Co., told the BusinessMirror that the higher spending suggests that the government remains focused on supporting growth through public spending.
‘While this has resulted in a wider fiscal deficit, the more important issue is whether the spending translates into stronger economic activity, job creation, and improved revenue generation over the medium term,’ Ravelas added. ‘Fiscal discipline remains important, but growth-enhancing expenditures can ultimately strengthen the government’s fiscal position if executed effectively.’
Budget hole
FROM January to August this year, the budget hole expanded by 21.30 percent to P1.054 trillion from P869.2 billion in last year’s comparable period.
Revenues reached P3.216 trillion during the eight-month period, up 4.27 percent from P3.085 trillion a year earlier.
The BIR amassed P2.238 trillion, up by 4.60 percent year-on-year, while the BOC’s cumulative collection rose by 6.87 percent to P664.1 billion.
Non-tax collections, however, declined by 2.83 percent to P289.8 billion from P298.3 billion due to a high base from one-off remittances in 2025.
Government spending totaled P4.270 trillion as of end-August, 8.01 percent higher than the P3.954 trillion recorded in the same period last year.
Interest payments accounted for P686.5 billion of the total, up 17.52 percent from P584.1 billion a year earlier.
Additional pressure
TO bridge the fiscal gap, the government also borrows to raise funds.
However, higher domestic yields will further raise the government’s debt-servicing costs as it undertakes new borrowings and refinances maturing obligations, Rivera explained.
‘This will place additional pressure on future budgets, leaving less fiscal space for infrastructure, education, healthcare, and other development priorities,’ he added.
‘With expenditures growing faster than revenues, priority is to strengthen revenue administration and ensure that public spending translates into productive economic activity, which can support a more sustainable revenue base,’ Rivera said.
The government has set a target budget deficit of P1.658 trillion this year, equivalent to 5.4 percent of gross domestic product.
The revenue collection goal is P4.806 trillion, while disbursements are pegged at P6.465 trillion.
Last year, the government ran a budget deficit of P1.576 trillion, wider by 4.67 percent from P1.506 trillion a year ago.