Govt cuts parastatal, council funding to reduce budget deficit

Making history: Serame became the first woman to deliver the country's Budget Speech this afternoon PIC PHATSIMO KAPENG
Making history: Serame became the first woman to deliver the country's Budget Speech this afternoon PIC PHATSIMO KAPENG

Government is proposing to reduce the civil service wage bill and cut support to parastatals and councils, as a way of narrowing the budget deficit which is estimated to reach P6.98 billion in the 2022-2023 financial year.

The country’s public finances have run at annual deficits since the 2016-2017 financial year, a situation worsened by the COVID-19 pandemic which forced the erosion of reserves housed in the Government Investment Account.

Delivering her maiden budget speech in Parliament this afternoon, Finance Minister, Peggy Serame said there was a pressing need for reforms to restore fiscal stability in the country and pursue the transformation and development goals laid out in Vision 2036.

The civil service wage in 2020-2021 was more than 16 percent of the Gross Domestic Product compared to the “acceptable 10 percent recorded by comparator nations,” while support to parastatals amounted to P4.08 billion in 2021-2022, she said. Local authorities were allocated P4.34 billion in the 2021-2022 financial year in revenue support grants.

Under Serame’s proposals, parastatal subventions will be decreased by P60 million in the upcoming year, while local authorities’ funding will decline by P170 million.

“With respect to the recurrent budget, there is a pressing need to reduce spending so that more resources can be provided to the development budget for the financing of development projects,” she said.

The civil service wage bill will be trimmed through the Directorate of Public Service Management’s Workforce Planning System which will identify where public sector employment can be restructured. Cabinet, meanwhile, is considering recommendations on which parastatals to merge, close or divest from.

“Gradually, the revenue support grant will be reduced, particularly to urban councils, to incentivise them to generate their own revenues to fund their programmes,” she said.

Other cost containment measures will include reviewing the allowances being paid to civil servants and looking for greater cost sharing in the tuition and maintenance allowances for students in tertiary education.

Serame is proposing to spend P74.8 billion in the 2022-2023 financial year, against forecast revenues of P67.87 billion. The deficit of P6.98 billion will be funded by domestic and external debt.

Under the proposed budget, the Ministry of Health and Wellness has been allocated the largest share of the recurrent budget at P10.01 billion to cater for pandemic related costs, among others, while under the development budget, the Ministry of Land Management, Water and Sanitation Services has been allocated the lion’s share at P5.06 billion.

Members of Parliament are due to begin responding to the budget proposals this week.

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