UA debate pits two budget aces

The Department of Budget and Management (DBM) defended keeping unprogrammed Appropriations (UA) in the yearly budget, indicating that it will be retained in the 2027 General Appropriations Act (GAA).

The UA, nonetheless, is considered a conduit for billions of pesos in pork barrel funds.

Acting Budget Secretary Rolando Toledo opposed removing the contingency funds from the 2027 national budget, which the agency has already started preparing.

It lacks a definite funding source, which, according to a recent opinion of one of the associate justices, makes it unconstitutional.

UA is funded only if the national government collects excess revenues, earns from new taxes, collects proceeds from the sale of state assets, or secures approved loans for foreign-assisted projects.

Toledo insisted that the UA is not a flawed proposal. “What is wrong is how we use these. It’s essential for us to limit the programs or projects that should be included,” he said during a UP Diliman School of Economics forum.

Standby funds are particularly crucial for foreign-assisted or Public-Private Partnership projects, which are sometimes approved after the year’s spending plan is already set, according to the DBM.

Many foreign-assisted projects had not yet been approved, so we placed them in unprogrammed appropriations.

The UA was also deployed to finance flood control projects under the Department of Public Works and Highways (DPWH) in 2023 and 2024.

Key projects with contingent funding

Relegating crucial projects to the UA came under criticism from former Budget Secretary Florencio Abad.

In a paper, he said that for four straight budget cycles, billions of pesos intended for airports, railways, mass transport, flood control, and climate protection were quietly removed from the national budget.

The projects were approved, the loans were negotiated and the need for these was undeniable.

“And yet, year after year, the funding was stripped away at the last moment,” Abad said.

The result was idle loans, delayed infrastructure projects, rising costs, and lost jobs.

From 2023 to 2026, the Executive proposed between P200 billion and P280 billion a year in foreign-assisted projects (FAPs) under the National Expenditure Program (NEP).

The projects were already vetted technically and financially, reviewed for environmental and climate risks, and negotiated with institutions like the Asian Development Bank, the World Bank, and the Japan International Cooperation Agency.

Between the NEP and the final GAA, legislators removed the bulk of these projects from the programmed budget. They dumped them into UA, where funding becomes uncertain, contingent or simply unusable.

In their place in the regular budget are the inserted pork projects of legislators.

In just four years, nearly P800 billion in foreign-assisted development projects were implemented in the UA.

FAPs require a peso counterpart from the government and annual authorization to use the loan.

When legislators strip a project from the programmed budget, one or both functions disappear.

Idle funds

The loan itself is not canceled. It sits there, signed, valid and unused. Without authorization, it cannot be drawn. Construction does not start. Workers are not hired, and communities wait.

And while the project is frozen, the money does not vanish.

The peso counterpart is reallocated, often to fragmented, low-priority, locally controlled spending: flood-control and drainage patches, multipurpose buildings, assorted assistance programs.

These may look useful on paper, but they are no substitute for nationally planned, rigorously vetted infrastructure.

In plain terms, development capital is broken down and recycled into spending that is easier to announce, easier to control, politically more rewarding, and more vulnerable to abuse.

Most foreign-assisted loans also charge commitment fees, which are paid simply for not using the funds.

From 2023 to 2026, these unused loans likely cost the government hundreds of millions of pesos in fees alone.

Investors, credit rating agencies, and development partners closely monitor foreign-assisted projects.

“When a government repeatedly approves projects, negotiates loans, and then blocks their use through its own budget, it sends a message: Plans here are fragile,” Abad pointed out.