War, recession and Covid interfere in the 2024 budget

The budget ministry has named the war in Ukraine, a potential global recession and the lingering COVID-19 pandemic as key considerations in determining the Marcos government’s spending plan for next year.

“The FY2024 budget is poised to respond to the expected ongoing headwinds due to the Russia-Ukraine war, external recessionary pressures fueled by inflation and the economic scars that COVID-19 has inflicted on our economy,” National Budget Memorandum 145, signed by Minister of Budget Amna Pangandaman, states.

“[T]The government will continue to implement risk-managed interventions in the areas of food security, transport and logistics, energy, bureaucratic efficiency and financial management, health, education and social protection to ensure unhindered and adequate delivery of social services, mitigate inflation pressures, accelerate economic recovery and address economic scars,” the note adds. January 12, also known as the 2024 National Budget Appeal.

He noted that the 2022-2028 Medium Term Fiscal Framework (MTFF) would provide a blueprint for realizing the Marcos government’s 8-point social and economic agenda, but also noted that limited resources conflicted with the “competing demands” of government programmes.

“Fullly aware” of that, “the FY2024 budget will ensure that only agency proposals that are ready for implementation are included.”

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“This means that agencies’ budget proposals are expected to contain concrete program plans and designs that identify key procurement and implementation milestones, including specific project sites and beneficiaries,” the memo states.

He adds that budget and performance will also be used to evaluate proposals.

The 2024 spending plan will incorporate priorities and policy directions under the Marcos government’s 8-point agenda and the Philippine Development Plan 2022-2028. It will also include programs that support the achievement of the goals of the MTFF.

The focus will continue to be on infrastructure development, in particular the Build Better programme, as well as the creation of digital and social infrastructure. It will not detract “in any way” from full support to “the poorest, underdeveloped, climate change and disaster-prone regions, nor to the social sector and basic public services”.

Funds will also be allocated for capacity building programs for local government units that will allow them to take over delegated functions and services.

The memorandum also states that “the national government will continue to prioritize regional strategic needs while aligning regional plans with national priorities in order to strengthen linkages to achieve equitable regional investment opportunities and growth.”

Among other things, the head offices have been mandated to take into account potential resource constraints for regional planning and budgeting due to the Mandanas ruling – a Supreme Court decision declaring LGU shares of national taxation not limited to the Inland Revenue Collection Office.

The government will also continue to adopt reforms to improve transparency, accountability and reliability. The note stated this as follows:

– two-tiered budgeting approach;

– Structure of the Unified Accounts Act.

Program-based budgeting through the program expenditure classification approach;

– classification of total amounts;

Preparing the cash budget in accordance with Executive Order No. 91 of 2019;

– A well-functioning, results-based and credible M&E system;

– budgeting software convergence to link, coordinate and synchronize the timing of critical interventions; And

– Open Government Partnership to enhance the participation of civil society organizations.

The budget call is extended to the heads of all government departments, agencies, bureaus, bureaus, committees, universities, government colleges and other national government agencies and “all other stakeholders”.

The same rationales for 2024—the war in Ukraine, etc.—were repeated in Company Budget Note 45, also issued last January 12, to all heads of government-owned or controlled companies, government financial institutions and other related entities.

Based on the attached calendar, all departments, agencies, etc. have until May 15th to submit their budget proposals, after which revisions will be made.

Also released on January 12, National Budget Memorandum 146 updated the implementation of the Converged Program Budgeting (PCB) approach, which aims to focus government resources on key projects and programmes.

In particular, the memorandum calls for two budget forms to be submitted online, naming key PCB people and clarifying PCB lead roles and participating agencies.

The proposed budget is scheduled for submission to President Ferdinand “Bongbong” Marcos Jr. and the Cabinet from June 20-21, after which the president will formally present the spending plan to Congress on July 24.

No preliminary estimates of 2024 expenditures have been made. The government plans to spend 5.268 trillion pesos this year, up 4.9 percent from the 5.023 billion pesos programmed for 2022.

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