Creating new agencies and failing to consolidate and coordinate functions of the government will not help make national budgets more efficient tools in the fight against poverty and high inequality, according to a local economist.
In a forum to launch the book titled Budget Reform in the Philippines: Making the Budget a Tool for National Transformation, University of the Philippines economist Toby Melissa Monsod said the budget can be a powerful tool in reducing poverty and inequality.
However, establishing new agencies and failing to address structural issues, such as the lack of coordination in government, can “fragment” the budget, leading to less funds for more important projects and programs.
“The point of the budget is not to provide for agencies. The point of the budget is to enable economic growth, enable equity, etc. And it’s not about giving each agency a budget. Unfortunately, that’s how people approach it,” Monsod told the BusinessMirror on the sidelines of the forum.
“People think that if you have an agency, you have more money. The more you do that, the more you fragment the budget. And everyone knows, when you fragment funds you may not be able to do the things that count,” she added.
Monsod said new departments, such as the Department of Housing and Urban Development (DHUD) and the Department of Disaster Resilience (DDR), will not solve the inefficiencies in housing and urban development as well as disaster response and rehabilitation.
“We are doing this for Africa at this moment, and that drives us. We can no longer rely on these big superpowers to come in and save us.”
Emile Hendricks, a 22-year-old biotechnologist for Afrigen Biologics and Vaccines
She also laughed off the idea of creating a separate Department of Water to manage the country’s water resources. She reiterated that creating departments will not be good for the national budget.
“I think people are trying to solve a coordination problem and I think the solution of creating a department is one of the most inefficient ways of solving a coordination problem,” Monsod said.
She also said that agencies such as the Department of Agrarian Reform and Department of Agriculture (DA) should be merged to have better coordination when it comes to the country’s land and natural resources.
Monsod said the management of the country’s land and natural resources needs to be reviewed. She said that separating land and natural resources is not only inefficient for government but also budgets.
Meanwhile, agencies that have devolved services, such as DA, should not be given more funding. However, this continues to happen because loopholes in the Local Government Code of 1991 allow the practice to continue.
“If you look at the local government code, there’s a loophole in the law. It says that if you have money, you can do it even if it’s been devolved. I think the whole approach to support farmers, support for agriculture as a sector, has to be reviewed basically. I think you cannot separate land and natural resources and when you talk about land, then automatically you’re talking about how to use it in the best way,” Monsod said.
Cash-based
Experts said cash-based budgeting, in order to work more efficiently, needs to be improved in light of the country’s age-old concerns about the “huge” carryover obligations that are not yet due and demandable.
Former Budget Secretary Florencio B. Abad said having huge carryover obligations that are not yet due and demandable “distorts” the budget process and “public funding priorities.”
In 2017 Abad said around P800 billion worth of obligations were carried over to 2018 and crowded out current spending. This highlights issues concerning past obligations, the preceding year’s obligations, and the current year’s obligations.
Abad said this can lead to confusion as to what is being spent by government. He said there must be a distinction on what funds are being spent so as to be more accurate.
“Over the years, this accumulation of carryover obligations that have remained not due and demandable has grown to trillions of pesos. And so, what cash budgeting should do is limit not just the period of obligation but also the period of completion of projects,” Abad said.
“You cannot receive money that you cannot both obligate and implement and disburse during the year. But if you do that and you don’t have agencies who are capable of spending significant amounts of money, then you are forced to reduce your budget and this is what happened to the 2019 budget,” he added.
For his part, Ateneo School of Government Dean Ronald Mendoza added that capacity building is also important to make cash-based budgeting work. This will prevent the government from committing mistakes that would lead to questionable results such as chopping up projects.
Monsod added that whenever policies such as those for budgets are crafted, it is important to look at the local context. She said policies that solve problems in other countries may not necessarily work in the Philippines.
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