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OPINIONS
/ COLUMNS
(August
25– August 31, 2008) Serious Business Jay S. Ramos Marshalling our
mishandled economy Aside
from the recent fuel and food critical
moments, talks among people about the budget shortfall have been put behind
the furnace (at least for the meantime).
However, the real factor gripping our financial affairs, and very much
well known to LGUs having unnecessary huge loans,
is the ever growing budget deficit. A current economic
investigation reinforces my range of vision, concluding that the government
may just push with rapidity to avert a severe economic crisis due to the
worsening budget shortfall. In addition to that, about 80 percent of the
national budget went to debt service, the salaries of government workers, and
the funding sent to the LGUs. According to what
seems true, the shortfall has had a harmful effect on the implementation of
other much needed programs as job creation, health care, upgrading
educational services and standards, low cost housing, infrastructures and
other significant lifeline boosters.
As the issue poses exposure to risk to our economy is due to the ever
increasing budget shortfall. Having recognized
the differences that when we are experiencing fiscal gap, our lavish
government has to find other sources to fund its projects and programs.
Promptly and without hesitation the only option is but to borrow, thus the
sum of several amounts added to debt of the national government including
local and foreign posted at P1.2 trillion in 1995, then it rise to a greater
degree to P3.4 trillion by 2003. As of today, your guess is as good as
mine—so terrible our economy has been mishandled. Consequently, the total
debt has risen to a frightening 68.7 percent of gross national product. However, if there are no reforms in place
to augment revenue, for sure the government would be in a difficult situation
as what is happening now. Naturally, this is
the impetus under the government’s tax collection reforms as in the
implementation of the E-VAT. In the
locality, the real property zonal evaluation has been drastically enlarged
with the corresponding bullying local collections of real property related
taxes. In whatever way, such reforms
have been causing injury to local businesses and likewise recent investors.
In fact, the enhancement in the zonal valuation has led to unrealistic
property valuations in In view of this, the
implementation of the new zonal valuation has brought a downward trend in
taxes collected over the same period compared to previous years (though
catching up at an inch) as this so-called “reform” measure has obviously
backfired. Of course who would
oppose the need to raise government revenues?
Nevertheless, based on the foregoing example, more meaningful and
practical reform must be carried out. This may be the only way to increase
governmental revenue and tax collections.
This is necessary if we are to deal with the budget deficit which is
at the mental state of our economic crisis. As a natural consequence,
government revenues have reached 17 percent of GDP about a decade ago. By 2003 its ratio decreased to 12 percent
though a slight progress with total revenue collections ascended to P626.6
billion, surpassing the 2002’s collection by 10.5 percent. Well, because of
poor revenues, government can’t afford to invest further on capital goods
thus, disturbing the uninterrupted delivery of basic services including
infrastructures which are vital for promoting private sector investment and
job creation. Comparatively, our
country for the last decade has posted capital expenditures at an amount
equivalent to only 16 percent of the total government spending whereas the
whole of Another economic
commotion on budget shortfall will likely push
interest rates skyrocketing. The usual
alternative when public coffers are running low the government has to borrow
funds from the public by selling treasury bills (T-bill). And taking into
account that the interest rates must be agreeably high. Additionally, the
report notes that bank lending rates are based on T-bill rates. Hence, the deficit ends up unjustly on the
investors who borrow from the banks. The continued acceleration of interest
rates deadens the private sector investment.
Likewise, the fiscal
gap encourages inflation. How? When revenues are lacking, when such shortfall
keeps on blowing up, the government is strongly tempted to use its “extra
powers”—that is the ability to pay for the shortfall by creating new money. The obvious is we
really need a new leader to marshal our mishandled economy. Ilocos
Times copyright 2008 |
Opinions / Columns Marshalling our mishandled
economy Bringing the forests back to
life |