By Justine Irish D. Tabile, Senior Reporter
THE DEPARTMENT of Budget and Management (DBM) said that it’s taking a look at cost-cutting measures should the revenue losses from the proposed suspension of excise tax on fuel aren’t fully offset.
“At this stage, there isn’t a automatic or immediate shift in expenditure priorities,” Budget Undersecretary Goddes Hope O. Libiran told BusinessWorld via Viber.
“Should the projected revenue losses from the proposed excise tax suspension not be offset by compensatory revenue measures, the federal government might want to adopt targeted efficiency-enhancing interventions to stay consistent with its fiscal deficit objectives,” she added.
Specifically, Ms. Libiran said that the department is taking a look at the rationalization of nonessential operational expenditures to safeguard priority and high-impact programs. Nonessential spending includes travel, training, consultancy services, and discretionary spending on materials and supplies.
“The continuing implementation of a uniform four-day workweek is likewise being assessed as a part of a broader expenditure optimization strategy,” she said.
Nonetheless, the DBM official said that the total fiscal implications of the potential fuel excise tax suspension and corresponding policy responses are prone to be addressed at the following Development Budget Coordination Committee meeting in April.
“The DBM stays committed to making sure that any plan of action achieves a prudent balance between delivering immediate economic relief and maintaining medium-term fiscal sustainability and macroeconomic stability,” Ms. Libiran said.
Last week, Finance Secretary Frederick D. Go said that the federal government is taking a look at the way to delay non-urgent programs and capital outlays that the federal government doesn’t need at this point.
Specifically, he said that these non-urgent capital outlays include those with an economic rate of return of only barely above 10%.
“So, if the economic rate of return is, say, 19% or 20%, I feel we should always just pursue it since it is an important return for the investment the country puts in,” he told reporters.
The suspension of the excise tax on fuel products is among the many interventions being checked out by the Philippine government amid oil price shocks and provide chain disruptions as a result of the war within the Middle East.
The House of Representatives and the Senate last week approved a bill that authorizes the President to suspend or reduce excise taxes on petroleum products during national or global economic emergencies as urgent.
The bill is now awaiting President Ferdinand R. Marcos, Jr.’s signature.
BAND-AID SOLUTION?
Nonetheless, some economists see the measure as a band-aid solution, citing the fuel tax suspension’s potential impact on the country’s already tight fiscal space.
“The suspension of excise fuel taxes while providing short-term relief will even impact the country’s fiscal space,” Philip Arnold “Randy” P. Tuaño, president of the Philippine Institute for Development Studies, told BusinessWorld via e-mail.
Citing data from the Department of Finance, he said that the suspension of fuel excise tax will end in revenue losses of around P136 billion if implemented from May to December 2026.
This excludes the extra P10 billion in value-added tax revenues, he said.
“The overall amount is around 8-9% of our projected deficit for the yr. Thus, while lower fuel taxes will support household consumption and can provide some slight relief on transportation and logistics costs, this will likely be offset by lower government spending and even delays in disbursements following lower revenues,” he added.
Peter Lee U, associate professor and dean of the University of Asia and the Pacific School of Economics, said that the lower tax collections will push the federal government to borrow more to finance projects that were originally planned.
“This may lessen fiscal space in the long run because the national debt as a percentage of gross domestic product (GDP) will grow. If GDP will grow more slowly (a possible, at the least, if unlikely scenario), then the ratio will grow even faster,” he said.
Nevertheless, he said that the measure will help decelerate the rise in pump prices.
Economic managers are targeting 5-6% GDP growth this yr.
Nonetheless, Jose Enrique “Sonny” A. Africa, executive director of the think tank IBON Foundation, said that he disagrees with the argument that the excise tax on fuel shouldn’t be suspended, because it disproportionately advantages richer households.
“That is blind to how oil excise taxes eat up a bigger share of the income of poorer households and likewise fails to know that poorer households are more exposed to second-round inflation effects on food, transport fares, and basic goods and services,” he said in a Viber message.
Mr. Africa said that suspending fuel excise taxes even for a full yr is not going to dramatically affect GDP growth.
“Oil excise tax collections are lower than P15 billion monthly on average and don’t even reach two-thirds of a percentage point of annual GDP,” he said.
Mr. Africa said that the important good thing about the measure is to offer relief for poor and middle-class Filipinos who’re reeling from spiraling costs.
“The actual issue will not be the revenue loss, but why the federal government chooses to depend on regressive taxes as an alternative of taxing extreme wealth and windfall profits to finance critical relief,” he said.
Mr. Africa said that the Marcos administration can decide to expand the fiscal space by taxing billionaires’ wealth, restoring previous income tax rates on large corporations and the richest families, and windfall taxes on energy and real estate.
He said that the rational response is for the federal government to soak up the cost-push, supply-side oil price shock by implementing measures similar to cutting taxes to assist protect the purchasing power of poor and middle-class households.
BUDGET RELEASES
Meanwhile, the DBM said 63.5% of the 2026 national budget has been released as of the tip of February, reflecting a slower disbursement rate in comparison with the previous yr.
In its Status of Allotment release report, the DBM said that P4.31 trillion of the budget had been released to national agencies and native government units as of Feb. 28.
This leaves P2.48 trillion remaining undistributed from the P6.793-trillion budget for the yr.
The pace of releases was slower than the 67% rate posted a yr earlier.
Releases to government agencies and departments amounted to P2.77 trillion, similar to 75.2% of their allocations.
Special purpose funds released by the tip of the month stood at P141.9 billion, representing 19.7% of the funds allocated.
Meanwhile, automatic appropriation releases were at 58% or P1.387 trillion.
These include P1.19 trillion for National Tax Allotment, P93.98 billion for block grant, and P82.21 billion for the retirement and life insurance premiums.
Excluding the opposite releases value P14.417 billion, the budget release rate is 63.3%, because the released funds reached P4.297 trillion out of the P6.793-trillion original program.
The opposite releases include unprogrammed appropriations value P9.55 billion, 2025 continuing appropriations of P4.816 billion, and special purpose funds value P4.58 billion.
“The slower February allotment release looks more like timing and prudence than a policy change,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.
He said that agencies are still aligning money plans, procurement, and safeguards by February, which is why the DBM releases fastidiously while watching out for revenues and global risks.
“For March, I expect releases to remain measured, not frozen, with a pickup once clearances are accomplished, particularly for infrastructure and priority programs,” he added.
Michael L. Ricafort, chief economist at Rizal Industrial Banking Corp., said that the slower disbursement rate still reflects some government underspending in view of the anomalous flood control projects.
“Anti-corruption measures and other reforms to further level up governance standards could have caused greater caution on some government spending, especially on infrastructure, to stop the danger of corruption,” he said in a Viber message.
For the approaching months, he said that the federal government’s catch-up spending may lead to the next disbursement rate.
“But (this) could still be offset by more cautious government spending to stop risk of corruption and leakages,” he added.