More money for LGUs next year, but then …
>> Thursday, September 23, 2021
EDITORIAL
Under a 2018 Supreme Court order, local governments will get a bigger
portion of national revenue next year, boosting their share in the proposed
2022 budget to more than one-fifth, or some P1.1 trillion ($22 billion). This
year they got 18.7% of the budget, or P844.6 billion.
But as much as P155 billion, or 70% of the additional funds earmarked for localities may end up unused, the World Bank estimates. Even now, local governments fail to spend half of the funds they’ve set aside for roads, bridges and other capital outlays due to weak planning, lack of skilled personnel and procurement bottlenecks. And any unspent funds from the tax share would remain in the local accounts, according to the budget department.
Philippine cities and towns are set to get more money from the central government next year, but analysts say many likely won’t be able to spend it, throwing up another obstacle to the economy’s fragile recovery.
Piles of unused public funds are perhaps the last thing the Philippine economy needs. It’s already expected to be among the slowest in Asia to recover from the pandemic, and the country’s economic managers see output returning to its pre-pandemic level only by the end of 2022 or early 2023.
The bigger budget shares comes after the Supreme Court ruled local governments are entitled to a share in all national taxes including customs duties, not just collections by the tax agency. Although the shift aims to improve delivery of basic services, it “could have a negative effect on growth” due to the risk of greater underspending, said Manila-based World Bank economist Kevin Cruz.
Confronted with rising debt, the central government specified duties that local leaders should take on using the bigger revenue share, including critical health care and smaller infrastructure projects like irrigation, roads and school buildings.
But as much as P155 billion, or 70% of the additional funds earmarked for localities may end up unused, the World Bank estimates. Even now, local governments fail to spend half of the funds they’ve set aside for roads, bridges and other capital outlays due to weak planning, lack of skilled personnel and procurement bottlenecks. And any unspent funds from the tax share would remain in the local accounts, according to the budget department.
Philippine cities and towns are set to get more money from the central government next year, but analysts say many likely won’t be able to spend it, throwing up another obstacle to the economy’s fragile recovery.
Piles of unused public funds are perhaps the last thing the Philippine economy needs. It’s already expected to be among the slowest in Asia to recover from the pandemic, and the country’s economic managers see output returning to its pre-pandemic level only by the end of 2022 or early 2023.
The bigger budget shares comes after the Supreme Court ruled local governments are entitled to a share in all national taxes including customs duties, not just collections by the tax agency. Although the shift aims to improve delivery of basic services, it “could have a negative effect on growth” due to the risk of greater underspending, said Manila-based World Bank economist Kevin Cruz.
Confronted with rising debt, the central government specified duties that local leaders should take on using the bigger revenue share, including critical health care and smaller infrastructure projects like irrigation, roads and school buildings.
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