IN order to avoid government underspending from ruining the chances of boosting the economy, the National Economic and Development Authority (Neda) called for the temporary suspension of the cash-based budgeting system under a reenacted budget.
In a briefing on Thursday, Socioeconomic Planning Secretary Ernesto M. Pernia said this can be the focus of an urgent review of the newly adopted cash-based budgeting process.
Pernia said reverting to obligations-based budgeting under a reenacted budget would allow the government to continue spending funds beyond the one year and three months’ grace period provided for in the cash-based budget system.
“It would be prudent on the part of the authorities regarding budgeting [that] when there is a reenacted budget, we better lift or temporarily postpone the cash-based budgeting requirement so that government agencies will continue to implement the budgets beyond the one-year period, or one year and three months’ grace period which is provided for in the cash-based budgeting system,” Pernia said.
Pernia said extending the use of funds should be done for infrastructure and other expenditures such as Maintenance and Other Operating Expenses (MOOE) and even feasibility studies that take time.
He said any delay in government spending will negatively impact on economic growth. He said government spending is a powerful stimulus to the economy because of the multiplier effect it can have on GDP growth.
“While we support the implementation of the cash-based budgeting system, the supervening circumstances such as the delay in the budget and the election season warrant an urgent review of the cash-based budgeting rules,” Pernia said.
“If the payment period and the budget validity are not extended, government agencies may decide to forgo implementing new programs and projects that are expected to take longer than seven months to complete inclusive of the procurement process,” he added.
As opposed to multiyear obligation-based budgeting, the annual cash-based budgeting “limits incurring obligations and disbursing payments for goods delivered and services rendered, inspected and accepted within the fiscal year.” This means that the extent of budget implementation is just one year.
Originally, the Department of Budget and Management (DBM) also proposed that the Extended Payment Period just be limited to three months after the fiscal year. However, this was extended further to six months after the House and the Executive met to resolve the budget impasse on the proposed 2019 budget of P3.757 trillion and agreed on a transitory cash-based system.