The Department of Finance (DOF) said the government will need to pass further fiscal reforms to address its widening budget shortfall in the wake of the prolonged coronavirus pandemic.

Finance Undersecretary and Chief Economist Gil S. Beltran noted that the budget deficit as a percentage of the economy, or gross domestic product (GDP), has risen to a staggering 7.86 percent in the first-semester this year.

End-June budget gap ratio was more than double compared with a pre-pandemic level of 3.4 percent and further swelled from 6.53 percent last year.

But despite the increase in budget dap, Beltran said that tax effort improved by 0.55 percentage point to 14.74 percent in the first-half from 14.19 percent last year.

The finance official attributed the rise on higher collections from Bureau of the Internal Revenue (BIR), Bureau of Customs and other offices.

BIR tax effort settled at 11.32 percent, up 0.17 percentage point from 11.15 percent, while Customs inched up 0.36 percentage point from 2.95 percent to 3.31 percent.

“The country should continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains,” Beltran said in his latest DOF economic bulletin submitted to Finance Secretary Carlos G. Dominguez III.

“Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” he added.

Earlier, Dominguez said the national government will embark on a path of fiscal consolidation with an initial aim to push the budget deficit back to its pre-pandemic level by 2025.

Dominguez has given Finance Undersecretary Gil S. Beltran and Assistant Secretary Ma. Teresa S. Habitan the task to draw up a roadmap for the government’s fiscal consolidation.

But with less than a year before the Duterte administration’s term ends, Dominguez said the implementation of their fiscal consolidation strategy will be passed on to their successors.

Based on the initial preliminary estimates presented by Beltran, the national government’s fiscal position may return to its pre-pandemic level by 2025. However, there is a big caveat to attain this goal.

“If we get all these measures [remaining bills under the comprehensive tax reform program] passed,” Beltran pointed out. “There is a big if.”

“It could be even earlier if the next administration will be quick. If they’re as quick as this administration, then we can even do it in 2024,” Beltran said.

In 2019, the government’s fiscal deficit stood at only 3.4 percent of GDP. The DOF expects the ratio to remain above the pre-pandemic level in the medium term, or 2024 at 5.3 percent.

Source: Manila Bulletin (