Philippines Analytical Update: April 9, 2020

Philippines Analytical Update | April 9, 2020
Authors: Marc Mealy, Kim Yaeger, Lilibeth Almonte-Arbez, Julianne Alberto

Reported spending and budget allocations for the Philippines' COVID-19 response

Following the passage of Republic Act 11469 (Bayanihan to Heal as One Act) colloquially known as the emergency powers law, the President of the Philippines delivered two reports, one on March 30 and the other on April 6, on the government’s efforts in addressing the COVID-19 pandemic. The reports shed light on the source of funds and allocations which the government is prepared to use during the 3-month effectivity of the law which spans the implementation of the Enhanced Community Quarantine (ECQ) covering the island of Luzon. The ECQ was supposed to end on April 12 but has been extended until April 30.

Discontinuing appropriated programs, projects and activities:

The President is empowered to direct the discontinuation of appropriated programs, projects or activities of any agency in the executive branch for items under the 2019 and 2020 General Appropriations Act (GAA) in order to utilize the savings to augment the allocation for any item related to support the response measures. As such, the Department of Budget and Management (DBM) has been coordinating with National Government Agencies to utilize allotments attributable to their existing appropriations for emergency response. Reported utilizations include the following:

  • The Department of Science and Technology has Php53.2 million (USD$1 million) funding for the development and accreditation of the low-cost testing kits from the University of the Philippines.
  • The Department of Social Welfare and Development[1] is allocated with:

Assistance to low-income households

Php108.7 billion (US$2.1 billion)

Social pension for indigent citizens

Php23.1 billion (US$456.6 million)

Indigents in crisis situations

Php6.6 billion (US$130 million)

Quick response fund (QRF)

Php1.2 billion (US$23 million)

Indigents in crisis situations (for later release)

Php2.1 billion (US$49.4 million)

  • The Department of Health was allocated with Php10.4 billion (US$205.6 million) for assistance to indigent patients and Php600 million (US$11.8 million) in QRF.
  • The Department of Labor and Employment has been allocated Php4.3 billion (US$85 million) to aid disadvantaged and displaced workers. Another Php2.4 billion (US$47 million) was earmarked for later release.

The DBM is preparing a master list of all items categorized as “for later release” under agency specific budgets from the 2020 GAA. This will help the government determine the programs, projects or activities of any agency that will be subject to discontinuation. The President reports that as of April 6, the DBM has identified appropriations amounting to Php 189.8 billion (US$3.7 billion) that may be discontinued under the 2020 and 2019 GAA, Php4.2 billion (US$83 million) of which will be coming from Special Purpose Funds discussed below.

Special Purpose Funds and Government Owned and Controlled Corporation funding:

The President has been authorized to consider as abandoned the purpose of unutilized or unreleased balance so that these funds can be used as additional appropriations for the COVID-19 response. The DBM is currently preparing a master list of all unreleased appropriations under these Special Purpose Funds (SPFs) estimated at Php372.7 billion (US$7.3 billion).

The law also empowered the President to allocate funds held by any Government Owned and Controlled Corporations (GOCC). As such, the Finance Department is discussing with GOCCs the dividends which will be collected from them taking into account the GOCC remittances to the Treasury with priority on collecting the first Php100 Billion (USD1.9 billion) from excess or unprogrammed revenue.

Agencies which have already remitted to the Treasury include:

  • Department of Transportation (Php10 billion, US$197.7 million);
  • Department of Energy (Php12.34 billion, US$244 million);
  • Cebu Ports Authority (Php500 million, US$9.8 million); and
  • Sugar Regulatory Authority (Php159.5 million, US$3.1 million).

The Finance Department also collected contributions from the GOCCs amounting to Php78.64 billion (US$1.5 billion). State-run Landbank of the Philippines remitted from various sources funds amounting to Php22 billion (US$436.2 million).

Reprogrammed, reallocated, and realigned savings:

The President has been authorized to reprogram, reallocate, and realign savings on other items of the 2020 GAA in the Executive Department. In his April 6 report, he mentions the following cash allocations released:[2]

Department of Health

Php600 million (US$11.8 million)

Department of Social Welfare and Development

Php3.9 billion (US$77 million)

Department of Interior and Local Government

Php520.6 million (US$10.2 million)

Department of Science and Technology

Php53.2 million (US$1 million)

Department of Labor and Employment

Php100 million (US$1.9 million)

Instrumentalities of government have complied with the reallocation of funds:

Environmental Management Bureau

Php2.3 million (US$ 45,400)

National Transmission Corporation

Php3 million (US$ 59,300)

Philippine Veterans Affairs Office

At least Php1 million (US$ 19,700)

Repurchase agreement:

The Finance Department and the Treasury added Php300 billion (US$5.9 billion) to the cash reserves by securing a repurchase agreement facility with the Bangko Sentral ng Pilipinas (BSP) or Central Bank. The government will be allowed to covert its security holdings into cash on the condition that it will repurchase the securities within a period of not more than six months.

In his address last April 6, the President directed the Secretary of Finance to look for other sources of funding and consider taking a loan. The Finance Department and the Asian Development Bank (ADB) have been ironing the details of a support package which the ADB will be extending to the Philippine government. It was also reported that a Php5 billion (US$98 million) loan facility has already been approved by the World Bank and that the Philippines is eyeing further loans of about US$6 billion.

Relaxing of rules to extend deadline of tax filings, to grant grace period for loan payments, and to defer rental charges:

Republic Act No 11469 allows the President to move statutory deadlines for filing and submission of any document, payment of taxes, fees, and other charges required by law, and to direct financial institutions to implement a minimum 30-day grace period for the payment of all loans falling due within the period of the ECQ without incurring interest, penalties, fees, or other charges.

In relation to this, the Manila International Airport Authority and the Civil Aviation Authority of the Philippines were instructed to extend a one-month rental holiday and a deferral of charges on the succeeding month to cover the ECQ period, with allowances for further extensions. The Department of Finance directed all lenders, including Central Bank-supervised financial institutions engaged in lending, to grant a 30-day grace period for the payment of all loans falling due within the period of the ECQ without incurring interest, penalties, fees, or other charges. The Trade and Industry Department likewise ordered a grace period for payment of commercial rent by Micro, Small, and Medium Enterprises falling within the ECQ.

Department of Finance March 16 press release:

The Finance Department earlier announced on March 16 that government rolled out a Php27.1 billion (US$536.2 million) package as an initial response to COVID-19. It consists of the following funds:

  • Php3.1 billion (US$61 million) for purchasing of test kits;
  • Php2 billion (US$39 million) for the social protection programs of the Department of Labor;
  • Php1.2 billion (US$23 million) for unemployment benefits;
  • Php3 billion (US$59.3 million) for scholarship programs and upskilling of workers;
  • Php14 billion (US$276.9 million) for the projects of the Department of Tourism;
  • Php2.8 billion (US$55.3 million) for the Department of Agriculture's Survival and Recovery Aid Program; and
  • Php1 billion (US$19.8 million) for the Department of Trade and Industry’s microfinancing special loan package of the Small Business Corp. for MSMEs.

This earlier package was met with criticism because of its prioritization of tourism projects. Moreover, reports surfaced that the Php14 billion allocated for tourism is not an additional fund but is instead the funding previously allotted to the Tourism Infrastructure and Enterprise Zone Authority, the Tourism Department’s infrastructure arm.

Accepting donations:

The Philippine government is likewise accepting donations and is willing to coordinate with domestic and international organizations. A list of possible donation sites and groups is being updated here. For this purpose, President Duterte issued Administrative Order No. 27-2020 directing that donations made to the government to address the crisis be coordinated by receiving agencies with the Office of the Civil Defense for inventory.

[1] The Department of Social Welfare and Development requested for Php200 billion (US$3.9 billion) funding. The President reported that Php100 billion (US$1.9 billion) has already been released to it to cover the Emergency Subsidy Program.

[2] Some are already mentioned under the first subheading.