By Luisa Maria Jacinta C. Jocson, Reporter

GOVERNMENT AGENCIES’ catch-up spending plans should also focus on boosting productivity and not just accelerating expenditures, analysts said.

“To justify more spending, the government must ensure that this program leads to higher productivity. ‘Catch up’ should be used as a synonym for matching the more productive countries and technologically advanced countries like Thailand and Vietnam, not to just expand government expenditures,” Ateneo de Manila University economics professor Leonardo A. Lanzona said in an e-mail.

“The best way to do this is to improve the bureaucracy by increasing its absorptive capacity and to undertake an aggressive industrial policy that can challenge the capabilities of our people and result in greater production,” he added.

The disappointing 4.3% gross domestic product (GDP) growth in the second quarter was partially attributed to a contraction in government spending. Government spending contracted by 7.1% in April to June, a reversal of the 6.2% growth in the first quarter and 10.9% a year ago.

Government agencies have been ordered to catch-up on spending plans amid low budget utilization in the first half.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said that there is a need to strengthen and improve capacities of local government units (LGUs) to improve spending.

“Government spending eventually will catch up but devolution of spending to local governments faces teething problems. LGUs don’t have the capacity, and reaping fruits from building capacity takes time as well,” he said via Facebook Messenger chat.

The government is currently working on devolving National Government functions and programs to LGUs, but full devolution has been delayed due to capacity issues.

“To be more specific, LGUs must learn to do data-driven development planning, including doing the diagnostics that can inform planners on allocating scarce resources. LGUs must likewise learn to cooperate with one another to scale up spending. Fragmented spending is wasteful and inefficient,” Mr. Sta. Ana added.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said in an e-mail that agencies should decentralize planning and procurement while still maintaining a mechanism for accountability.

“Improving budget utilization requires broader staffing, wider training and an agile bureaucracy, as centralized procurement and planning teams can only process a finite number of projects and programs within specific timeframes,” Mr. Ridon said.

He also recommended that the government should increase private sector participation in ramping up spending.

“The government should be able to broaden its list of properly vetted private sector partners which it can engage to implement its programs and projects,” he said. “Agile planning and procurement teams will still have their work delayed if there is a lack of private sector partners which can implement specific programs and projects.”

Mr. Ridon said the government can implement safeguards and strict timeframes to ensure checks are released promptly to avoid slow spending.

“There are various reasons for the non-release of checks by implementing agencies, which are not always due to unreasonable delay or red tape. There is clear justification for the non-release of checks if there are deficiencies in project documentation, or if there are concerns relating to a project’s quality or actual completion,” he added.

Budget Secretary Amenah F. Pangandaman noted that underspending was partially due to unreleased checks in the first half.

“It’s possible that agencies were able to prepare their checks or payments for projects that need to be paid, but it hasn’t been encashed,” she said during a Laging Handa briefing.

The Bureau of the Treasury in its latest Cash Operations report attributed the sluggish spending to “substantial outstanding checks recorded as of end-June amounting to P124.1 billion, according to consolidated bank reports.”

Ms. Pangandaman also cited lower interest payments as a factor behind slow spending.

Other contributors to slow expenditures are ongoing social protection programs, such as the Pantawid Pamilyang Pilipino Program and the Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers program.

She also cited procurement-related difficulties and billing concerns from suppliers and creditors.

During the same briefing, Ms. Pangandaman also named the government agencies that continue to have low obligation rates.

As of June 30, the Department of Information and Communications Technology (DICT) had the lowest obligation rate at only 9.2%, followed by the Commission on Elections (26.1%), Department of Agrarian Reform (28.9%), Department of Social Welfare and Development (34.2%), and Department of Energy (34.3%).

“If you look at it on average for all the agencies, (the obligation rate) is 32% as of June 30,” she added.

Earlier data from the DBM showed that the cash utilization rates of government agencies stood at 92% at end-July, slower than the year-earlier pace of 94%.

In July alone, the utilization rate was at 67%. This was also slower than the 71% rate in the same month a year ago.

Local governments and state-owned companies used P2.3 trillion of the P2.5 trillion worth of notices of cash allocation issued as of the end of July. This left P194.19 billion in unused allocations.