The President has accepted the resignation of the National Treasurer, and the bond market plunged on fears (according to Bloomberg) that the government might change its budget deficit plans. Ricky Carandang, in a remarkable and fascinating blog entry yesterday, explains why those fears aren’t just a knee-jerk reaction to the resignation. He says, government’s slipping in its tax collection targets. One reason, he says, is the strengthening peso. Another reason is that there’s a kind of protest action taking place, among customs collectors. the result is that the gain of about 80 billion in income from the added VAT, may be offset by what the Department of Finance, in an internal memo, says is a possible shortfall of 110 billion:
What could this mean? That government finances could actually be worse off than they were before the passage of the VAT increase? If no action is taken to assure the markets, much of the money flowing into the stock market and into Philippine bonds could start flowing back out. Ratings agencies could reconsider those rosy credit rating outlooks. The few people who benefit from the narrow economic growth we see today could be fewer.
Carandang predicts that the easiest solution will be for government to once more raise taxes (and notes there’s mixed news on whether Omar Cruz resigned because of “policy differences” with other members of the President’s economic team). For now, the President can’t be prudent about public spending, because it’s an election year. Omar Cruz himself says he didn’t quit over policy differences, but his parting shot seems to validate Carandang’s entry:
Cruz warned the government that it needed to come up with new tax measures to ensure that it balances its budget next year, a much-vaunted goal that is under threat as tax collections fail to keep pace with increased spending.
Manila has a budget deficit goal of P63 billion this year, or 0.9 percent of gross domestic product, and Cruz said it was still “a reasonable target” because the government can use proceeds from asset sales to bridge the gap between expenditure and collections.
But he said such sales were unsustainable over the longer term.
“Until you come up with a new set of tax measures you will not generate revenue annuity.”
FinanceAsia says Cruz’s shoes will be hard to fill -and that a wait-and-see attitude is in the cards.
In other news… Justice Secretary Raul Gonzalez has declared he’s offering a bounty to ward leaders that deliver a 12-0 senatorial shutout for the administration. His remarks have caused the usual ruckus, but this time, the resident loose cannon in the administration decided to unload on his partymates, too. At the same time, the President’s reduced the powers of the Bureau of Immigration and shifted them on to the Department of Justice. All “vital functions” of the immigration commissioner and the three-man board of commissioners have been transferred to the Secretary of Justice. This is an added vote of confidence, by the President, in Sec. Gonzalez. Good grief.
Look at this comparison of the Pulse and SWS senatorial surveys; compare the scores for the candidates, too, in bar graph format.
In the punditocracy, Arab News column for this week is Filipinos Are Cosmopolitan and Far Less Insular.
Manuel Buencamino comes up with some snappy lines, to show why Team Unity Team Arroyo (TUTA) shouldn’t be voted for. Ellen Tordesillas is convinced Gringo Honasan has sold out to the Palace and explains why. Ricardo Saludo begins to lay the predicate for the results the Palace predicts in terms of the coming elections:
Should 200 House seats go to the ruling coalition, that might be enough to block another impeachment bid. If it also controls the Senate, the continuity of national leadership till 2010 would lay a solid foundation for social stability, investor confidence, and economic advancement, and not return the country to disruptive protests and politicking.
The choice on May 14 is clear.
Actually, what’s clear are the priorities of the Palace: it fears impeachment above all things.
The Inquirer editorial says the Chief Justice is being combative out of necessity: most recently Chief Justice Puno’s raised the hackles of the Palace and the US Embassy.
Bong Austero writes on moveable holidays: the President’s declared May 1 a holiday, but no “sandwich day,” alas, covering April 30; meanwhile, she’s also proclaimed Election Day a holiday (will that be good or bad for voters?)
As Russia buried Boris Yeltsin, an op-ed piece by Nina L. Khrushcheva pointed out he was the first Russian leader chosen democratically, and who gave up power voluntarily to a constitutionally-ordained successor.
The blogosphere has History Unfolding predicting that the Maliki government of Iraq is poised to fall. Placeholder looks at the Jeffersonian and Madisonian models for economic development. In Inquirer Current, John Nery pays tribute to David Halberstam.