Higher fourth-quarter revenues as well as underspending in the development budget helped the 2020-2021 deficit fall from a forecast record of P21 billion to P14.6 billion, BusinessWeek has learnt.
At its forecast level, the 2020-2021 deficit would have been equal to about 12% of GDP, a situation former Finance and Economic Development minister, Thapelo Matsheka described as “an extremely serious deterioration in our fiscal position”.
This week, estimates from the ministry indicated the actual deficit for 2020-2021 had improved from the forecast made in the February budget, although still in dangerous territory for fiscal authorities.
Preliminary finance ministry estimates show that total spending for 2020-2021 amounted to P65.8 billion, lower than the forecast P69.4 billion, while revenues amounted to P51.2 billion, higher than the forecast of P48.3 billion.
“Total expenditure underperformed and this was more pronounced in the development budget, which was 16% less than the revised budget,” the estimates read.
“This is in part attributed to the COVID-19 measures such as lockdowns and restrictions of movements, which resulted in most development projects being put on hold including delays in procurement of tenders related to these.”
Total revenues in the fourth quarter of 2020-2021, which covers the period between January and March 2021, amounted to P15.5 billion, compared to P11.7 billion over the corresponding period in 2019-2020. The fourth quarter 2020-2021 revenues accounted for more than a third of the full-year revenues, indicating the recovery of key economic sectors in the latter part of the fiscal year.
The lower deficit for 2020/21 will raise the government’s hopes of easing the fiscal challenges brought on by the pandemic. With government reserves depleted due to COVID-19 interventions, fiscal authorities have been increasingly leaning on the domestic capital market for budget support through debt.
The market, meanwhile, has been pressing for higher yields or returns on the debt government is looking for, resulting in a stalemate that has seen government struggle to raise longer-term debt in the local market.
This year, the new finance minister, Peggy Serame is expecting a P6 billion deficit or about three percent of the GDP. The deficit will again be funded mainly from domestic borrowings, although authorities have said discussions are ongoing with external financiers such as the World Bank.