The Philippine government asked Congress on Wednesday to approve a 15.4 percent increase in its budget next year for subsidies to shield the economy from high food and fuel prices and investment to boost growth. Budget Secretary Roland Andaya proposed a 1.415 trillion pesos budget ($31 billion) for 2009, saying it was "shaped by the food and fuel price hikes..."
The 2009 budget, which is expected to take months to pass through Congress, assumed a 40 billion pesos budget deficit. The government estimates that the budget, which increases the allocation for spending on agriculture by 62 percent to 35.8 billion pesos, will help the economy expand 6.1-7.1 percent in 2009 from a 5.5-6.4 percent estimated growth in 2008.
"We are pumping up spending for agriculture, because we cannot forever rely on foreign granaries to feed our people," Andaya said. The Southeast Asian nation is the world's biggest rice buyer so far this year. It spent a record $1.54 billion to purchase 2.3 million tonnes of the grain. It imports about 10 percent of its annual rice requirements.
President Gloria Macapagal Arroyo, a former economist, had made ending a decade of government deficits the centerpiece of her economic platform. She abandoned that goal to allow more spending to offset slower growth and high commodity prices. Education got the biggest allocation at about 168 billion pesos, or about 8.5 percent of total spending. Defence gets 65.2 billion pesos, or about 4.6 percent.
"To give us flexibility to address economic challenges, we have jettisoned our timetable to balance the budget this year," Andaya said. Under the proposed 2009 budget, social welfare will receive a 117 percent increase in funding for cash payments and subsidies to families most vulnerable to soaring commodity prices.
Government workers will get a pay rise. Cost of debt servicing will fall to 21.4 percent of the budget next year from 22 percent this year and 31.6 percent in 2005 after Manila repaid costly debt early and took advantage of its improving economy to borrow on better terms. Capital spending will rise 18 percent to nearly 253 billion pesos next year and infrastructure expenditure will rise around 17 percent to 185 billion pesos. Next year's proposed budget assumed inflation of 6-8 percent, and a foreign exchange rate of 42-45 pesos per dollar.