A critical assessment of the budget deficit management under the Arroyo administration.

Abstract

The Philippines has been operating on a fiscal deficit for over two decades. It only had budget surplus years during the Ramos administration which is mainly attributed to the aggressive privatization during that period. Since 2001, President Gloria Macapagal-Arroyo has implemented various measures both in the expenditure and revenue side of the budget in order to achieve a balance budget. The Reformed Value Added Tax or RVAT was the most influential tax measure that the Arroyo administration courageously implemented. However, it cannot sustain the competent revenue level it achieved on the first year of its implementation. The budget deficit is usually seen to be solved in two ways – trimming down of expenditures and increasing of revenues through additional taxes. Nevertheless, the study has proven that these traditional measures are no longer seen to be productive in the long-run. Furthermore, in the assessment of the budget deficit management of the Arroyo administration, major flaws were seen such as the occurring tax evasion, redundant tax incentives for foreign companies/corporations, and debt servicing which is eating up a huge amount of the national government budget. More importantly, the study shows the major problems or hindrances in good budget management: corruption, trade liberalization, and deficit spending. For the budget to be balanced, the government must first solve these problems as they are seen to be the causes of the budgetary deficit of the country. After nine years, the Arroyo administration has failed to manage the budget deficit of the country.