Expenditure and Strategic Allocation of Resources Romulo E. M. Miral, Jr. 6 June 2017

Phil Credit Rating: Investment Grade Summary of current credit views strengths weaknesses Robust economic growth amidst macroeconomic stability, anchored by well-managed inflation Strong external payments position Stable and resilient banking system Low revenue mobilization relative to investment-grade peers High, albeit declining, foreign currency government debt Low per-capita incomes

Asian Development Bank (2007) Asian Development Bank (2007). Philippines: Critical Development Constraints

Policy is medium term, Budget is short term Allocative efficiency: The numbers tell the story …

Fiscal Planning and Reporting

MTEF DEFINED A three-year rolling budgeting approach that sets out Government’s expenditure plans within an available resource ceiling. A tool for linking policy, planning & budgeting over the medium-term for fiscal discipline and strategic resource allocation; It consists of a top-down resource allocation and a bottom-up estimation of the medium-term costs of existing policies or PAPs in order to determine fiscal space; Involves rolling over of ongoing programs to provide predictability while allowing the incorporation new or changes in policies

WHAT HAVE WE DONE UNDER MTEF? Kept budget deficits manageable at 1% in 2006 to 3.5% in 2010; Restructured the budget towards more funds for non debt expenditures, specially infrastructure outlays; Increased focus on results by affording predictability of policy and funding so that agencies can plan ahead and programs can be sustained; Provided line agencies with increased autonomy over program choice, thereby increasing incentives for efficient and effective use of funds. SECRETARY EMILIA T. BONCODIN Department of Budget and Management February 5, 2004

MTEF “While its principal focus is to promote allocative efficiency, an MTEF necessarily instills aggregate fiscal discipline and enhances operational efficiency.” Jose Edgardo Campos and Laura Walker, ADB

Medium Term Fiscal Position

Two-tiered budget preparation system Baseline agency budget – all expenditures on on-going programs Budget ceiling – can be set at total domestic revenues plus sustainable level of borrowing Above the baseline budget (Fiscal space) – expenditures on all new programs Jose Edgardo Campos and Laura Walker, ADB

Critical Tools Economic Assumptions and Revenue Forecasts Policy/Program Cost Estimates Plan and Budget Linkage

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