Gaolathe plans to spend P97.6 billion in the upcoming financial year, set against forecast revenues of P75.5 billion. The resultant expected deficit of P22.1 billion, if realised, will be the second largest in absolute terms in the country’s history, coming after the projected P24.7 billion for the current financial year which ends on March 31. Gaolathe’s proposed spending is P4 billion higher than the P93.4 billion the government expects to have spent when the current financial year ends. Both the current financial year’s expected deficit and next year’s are significantly above the fiscal rule under which the government aims to limit budget shortfalls to no more than four percent of the GDP. The Finance minister acknowledged the issues in his speech. “It is evident that the proposed budget for the 2025–2026 financial year triggers important fiscal policy questions on fiscal consolidation, fiscal discipline, fiscal sustainability, budget credibility, financing of the deficit and its implications on debt sustainability,” he said. “With a projected deficit that exceeds the ideal threshold of four percent of GDP, our commitment to conducting fiscal policy in line with global best practice is more critical than before.”
He added: “This calls for stringent measures and action to improve productivity and deliver more with less, improve operational efficiency in public procurement processes, utilise e-services to deliver government commitments as well as maximise revenue collection.” The new government was under pressure to progress projects outstanding in the Transitional National Development Plan, whilst accommodating new initiatives under its human rights-based economic development priority. In addition to increasing old-age pensions and introducing allowances for new-borns, Gaolathe also allocated funding for free sanitary pads for female students, whilst pledging to revisit social allowances “as our economy regains its strength and our fiscal position improves”.
