Philippine lawmakers on Tuesday approved a 10.4 percent increase in the government's 2012 spending budget to help fund economic and social reform programmes which Manila hopes would boost growth next year. The final budget measure will now be prepared for signing into law by President Benigno Aquino next month. The 1.816 trillion pesos ($41.5 billion) budget is about 170 billion pesos more than the 2011 spending allocation.
Manila is forecasting growth of 5 to 6 percent in 2012, down from an earlier forecast of 5.5-6.5 percent, but slightly faster than this year's expected growth of 4.5-5.5 percent. The government has said it would be difficult to hit its 2011 growth target due to weak exports and slow state spending early in the year.
Budget Secretary Florencio Abad said the 2012 budget was designed to address bottlenecks that have hampered "timely execution" of spending this year, which was partly blamed for the slow growth in the first nine months of 2011. Next year's budget also assumed a fiscal deficit of 286 billion pesos or 2.6 percent of GDP, lower than this year's fiscal gap target of 300 billion pesos or 3 percent of GDP. The budget shortfall will be funded in part by foreign and local borrowings.
In its spending plan, Manila raised its budget on economic services by 21 percent, the largest growth, with the sector accounting for almost a fourth, or 438.9 billion pesos, of the total. Social services made up nearly a third of the entire spending pie, or 575.8 billion pesos. Senator Franklin Drilon, Aquino's key political ally in the upper house of Congress, described the 2012 approved spending plan as "biased for the poor".
Debt service amounts to 356.1 billion pesos, almost 20 percent of the 2012 budget, against around 23 percent share in 2011. Aquino's allies, who dominate both houses of Congress, also approved without cuts the government's proposed 39 billion pesos allocation for conditional cash transfers, or dole-outs to millions of poor households in exchange for sending their children to school and regular health check-ups.
But Edcel Lagman, leader of the small opposition bloc in the lower house of Congress, criticised the spending plan, saying the allocation for the government's dole-out programme and public-private investment plan were "overstated". He said these funds could have been reduced to augment the budget for education, health and infrastructure.