Bastardized budget creates debt pile

The substantial P411.5-billion budget deficit recorded in the first four months of the year will have several implications for the fiscal situation, the most significant of which is the need to cover the shortfall through borrowings that will increase the national debt.

Red ink is flowing amid the questionable reallocation of funds in the 2025 General Appropriations Act (GAA), particularly the use of the national budget to bankroll pet projects of members of Congress.

“Blank items” in the bicameral conference report, which were subsequently mysteriously filled with P241 billion worth of pork barrel items, violated a provision of the 2013 Supreme Court decision outlawing the Priority Development Assistance Fund (PDAF).

Based on government data, the cumulative budget balance stood at a deficit of P411.5 billion for the first four months of 2025, due to a 13.57-percent increase in public spending to fuel economic activity and support the priority programs of the Marcos administration.

Ramped-up spending is fueling the widening fiscal abyss. Economic officials argue that if the spending is for productive ends, then the yawning gap in yearly government allocations is favorable to the economy.

A higher gross domestic product (GDP) makes the fiscal imbalance manageable, but throwing public money into the fire through doles and one-time programs with political objectives unnecessarily bloats the deficit.

An expanding debt level is a curse to the economy, as a growing portion of the yearly appropriations is used for servicing loans, including both principal and interest expenses.

In the proposed 2025 national budget, approximately 13.8 percent, or P876.7 billion, was allocated to debt servicing, covering interest payments on domestic and foreign debts, as well as net lending to government corporations.

This represented a significant portion of the budget, with a key component being interest payments on debts.

A twisted priority was evident in the government’s failure to maximize the use of the funds of the Philippine Health Insurance Corp. (PhilHealth), which had astonishingly accumulated a considerable reserve fund despite many Filipinos yearning for essential health services that were beyond their financial reach.

At most, a hospital bill of about P100,000 would have PhilHealth assuming only P15,000, which Senator JV Ejercito, the proponent of the Universal Health Care (UHC) Act, said is an appalling situation as the law provides that all Filipinos are entitled to free medicine and hospitalization.

Legislators during the recent inquiry into the Department of Health’s budget raised concerns about the shortage of medical supplies in government hospitals. Patients are required to pay for supplies that the health insurance fund should cover.

Yet, PhilHealth practically has an endless fountain of funds. Since the enactment of the Sin Tax Law in 2012, PhilHealth has accumulated a substantial amount in excess funds. Every year, it generates an estimated P50 billion to P80 billion in savings.

Instead of meeting its mandate to provide free healthcare to all, PhilHealth chose to invest its surplus in government securities and other high-yielding financial instruments and investments.

Even without a national government subsidy, PhilHealth continues to generate sufficient resources from sin taxes, as well as support from the Philippine Amusement and Gaming Corp, the Philippine Charity Sweepstakes Office, the Department of Health, and the contributions of its members.

A petition to the Supreme Court challenged the misuse of P60 billion in PhilHealth funds to cover unprogrammed items in the budget, which were taken from several agencies in the 2024 budget to accommodate pork barrel insertions.

When decent healthcare remains inaccessible to many Filipinos, even the P500 billion in PhilHealth’s reserve funds is considered insufficient to meet the requirements of the law on universal healthcare.

A collusion between members of Congress and the Executive made the pilfering of healthcare funds possible.

A provision in the 2024 General Appropriations Act allowed the Department of Finance (DoF) to sweep up idle funds from agencies, resulting in PhilHealth being told to surrender its “excess funds” to the Bureau of the Treasury.

Finance Secretary Ralph G. Recto indicated the need for the government to mobilize unused funds to finance key programs without incurring additional debt.

What transpired, however, is that more than P200 billion in key government projects were displaced during the bicameral conference committee that drafted the final version of the 2024 budget.

Pet projects of the members of the House of Representatives and the Senate were instead given priority, while the items set aside were relegated to the unprogrammed portion of the budget that the government needed to scrounge around for funds.

The priority given to the pork barrel went against the Supreme Court’s landmark 2014 decision, which stressed that such lump-sum discretionary funds in the budget were unconstitutional.

Unconscionable is how the fiscal shortfall was inflated to accommodate political survival.