The government is still hoping to report a primary surplus of at least P13 billion to P15 billion for 2009 even with an emerging budget deficit of P300 billion due to revenue shortfalls and no additional cash from privatization to plug the fiscal gap.

The Department of Finance (DoF) had programmed a primary balance of P61.2 billion for 2009, which was less than 0.8 percent of gross domestic product (GDP). This was significantly lower compared to 2008’s actual P216.3 billion primary surplus or 2.9 percent of GDP.

DoF Undersecretary Gil S. Beltran, in an interview last month, said the government’s primary balance position is an important indicator as it is calculated with the budget deficit plus interest expense.

“The (fiscal) deficit is revenue with expenditures plus interest expense but in calculating the primary (position) you net out the interest payments,” Beltran explained. “It is a very good indicator in terms of fiscal position (after debt stock) except that nobody talks about it.”

The primary deficit was P12.4 billion as of November. Since the primary balance, which measures a government’s capability to pay its debts, is calculated as revenues minus expenditures but excluding interest payments, it is considered an accurate measure of government expenditures.

The latest primary gap number was a reversal of the P197.9 billion surplus reported the same period in 2008.

For the month of November alone, the government was still able to report a primary surplus of P4.3 billion, which was an improvement against October’s deficit of P14.4 billion.

Revenues collected from January to November last year were 5.5 percent lower at P1.021 trillion compared to the same period in 2008 while expenditures net of interest payments amounted to P1.034 trillion, which was 17 percent more compared to what was reported a year before. The total interest payments in the first 11 months of 2009 were P260.1 billion.

In November, the government collected revenues of P96.3 billion, 11.7 percent down from 2008 while expenditures minus interest payments totaled P92 billion, 9.1 percent lower year-on-year.
Interests paid on past debts totaled P10.7 billion, which was 12.3 percent lower year-on-year.

Also as of November, the government’s budget deficit stood at P272.5 billion, which was 308.7 percent higher compared to same time in 2008 of only P66.7-billion budget deficit.

Credit rating agencies such as Fitch Ratings, Standard & Poor’s and Moody’s Rating Services monitor the primary balance to determine the country’s capability to pay the national debt.