Budget and Management Undersecretary Laura Pascua issued this assertion following market apprehension that the fiscal consolidation program of the government may go astray this year due, also, to the downward revisions in the collection targets of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC).

"The fiscal authorities must be forthright where the money will be sourced following the BIR and the BoC lower revenue performance. Otherwise, this uncertainty on the fiscal outlook could take its toll and influence the macroeconomic stability," a market mover lamented.

"In fact, the T-bill (treasury bills) rates have started to inched-up a bit," another market player from a domestic institution pointed out. While the yields of risk-free T-bills stays relatively low compared to recent up, the benchmark 91day tenor is now flirting to breach back to 3.0 percent level from a historic low of 2.5 percent last auction.

The situation is aggravated by the possibility of a large expenditure uptick with the forthcoming midterm election this year, a development which most of the market players believed could exert pressure on the fiscal consolidation program and could trigger a huge jump in interest rates.

"The deficit will still be the same," Pascua, on the other hand, declared.

She admitted the PTIC proceeds will solely be set aside to fund the Comprehensive Agrarian Reform Program (CARP). "The P25 billion is really for really CARP."

For this year, financing for CARP has been estimated at P12 billion, which will now be sourced from the PTIC proceeds with the balance of P13 billion to be set aside for CARP’s financial requirement in 2008.

According to Pascua, the reductions in the BIR and the BOC collection performance this year will be mitigated by the revenues from PTIC since the government will no longer have to scout for other revenue source to fund CARP this year.

Land Bank of the Philippines normally puts the bill first to pay the land purchases that had been identified as "carpable" and land distribution with the Department of Budget and Management reimbursing later.

"The reduction will be offset since the cash will be there but accounting wise, part of revenue will go to the special account in the general fund to impact to revenue program. So the deficit will remain at P63 billion," she explained.

The fiscal managers have actually relied on the P25.2 billion proceeds from PTIC shares to neutralize the P18.2 billion drop in BIR target collection and P6.9 billion in BoC.

The proceeds would have been more than sufficient to offset the combined cut worth P25.1 billion.

But, the government will be unable to tap the PTIC shares proceeds to bridge the collection gap since the said asset has been declared to be part of the ill-gotten wealth of the deposed and late President Ferdinand Marcos.

Market players said this is crucial as this could spell a big difference, particularly on interest rates since one area the government can bridge the revenue gap is to issue additional riskfree securities, which then could mean an acceleration in the rates.