November - December 2001
Vol. XIX No. 6
What's Inside 4 5 6 7 12
Questioning de Soto: the case of land and governance in Uganda Will shift to gross income taxation help? A letter from Japan On turning 65 VSO volunteer shares environment database program
ISSN 0115-9097
New forms of financing the fiscal deficit* Rosario G. Manasan**
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n 2002, the proposed President's Budget estimates the fiscal deficit of the national government to reach P130 billion or 3.1 percent of the gross national product (GNP). Considering the spate of recent devel-
opments in the macroeconomic environment, however, this target does not seem
Editor's Notes
to be realistic at this point. An analysis of the country's fiscal system also reveals its incapacity to generate revenues. As such, in all probability, a more realistic fiscal The Department of Finance's (DoF) focus on coming up with innovative and creative ways to finance the national government 's fiscal deficit rather than on its regular revenue generation function is the subject of the issue's main article, which is reprinted from PIDS Policy Notes No. 2001-13 authored by Dr. Rosario G. Manasan, a senior research fellow at PIDS. For the government to fulfill its role as the overseer of development, it must first and foremost collect sufficient resources to finance its numerous programs. At present, the Arroyo administration is committed to wage a battle against poverty, and thus, resources must be allocated efficiently and equitably to the various sectors of Philippine society, e.g., housing, health, education, national security, agriculture and fisheries, and good governance, among others. Thus, the article implies that more attention should have been given to
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deficit would be much higher than P130 billion. Recently, however, the government appears to have focused not so much on improving its revenue performance and, thereby, reducing the deficit. Rather, a disproportionate amount of energy seems to have been put into searching for innovative and creative modes of financing the fiscal deficit. A more careful examination of these new approaches indicates that they have rendered the orthodox way of measuring the fiscal deficit less meaningful. Thus, their evolution highlights the need for greater transparency in the fiscal accounts.
[Creative] financing 101 Among the new forms of financing taken up by the government in the past few years are the following: * arrearages and accounts payable, * zero coupon bonds, * securitization, and * partnering with the private sector and GOCCs.
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* This article is a reprint of PIDS Policy Notes No. 2001-13 entitled "New Forms of Financing the Fiscal Deficit: Examining the Effects on the Fiscal Accounts" by the same author. ** Senior Research Fellow, Philippine Institute for Development Studies (PIDS).