'It's ok to overspend in 2008 to protect poor': ADB official

from ABS CBN News

By CHARO LOGARTA

The Asian Development Bank (ADB) has assured government that it will not mind a breach of its commitment to balance its budget this year, if high commodity prices and a global economic crunch necessitate increased spending.

The government's economic managers have said mitigating measures may be implemented to cushion the impact of higher food and fuel prices on the poor.

They said they were prepared to spend more, if necessary, a move that concerned several analysts and multilateral agencies, including the World Bank.

Need to protect vulnerable

But ADB's Deputy Director-General for Southeast Asia Thomas Crouch told reporters at a press briefing Wednesday that while balancing the budget is an issue of maintaining the country's credibility with investors and donors, it was just as crucial for the government to protect vulnerable sectors.

“There is no absolute reason that 2008 must be the year for fiscal balance for as long as that occurs along with improvements in tax revenue efforts,” Crouch says.

Crouch admitted that many analysts regard the twin threats of a US recession and high commodity prices and the commitment of a balanced budget as litmus tests for the Arroyo administration.

“Managing the economy is a balancing act, and the key element here is that it needs a calibrated response on who you want to protect,” said Crouch.

Subsidies must be well-targeted

“My view is that you need very sharp instruments, not blunt ones. The important thing is to ensure that any subsidies given are well-targeted and well-focused on those people that are impacted most by rising rice and fuel prices,” he said.

“There is nothing intrinsically wrong with providing safety nets to those who are already in poverty or those in danger of falling into poverty. But the important thing is to maintain the integrity of the fiscal reform program,” Crouch said.

The Philippines is at the tail-end of its fiscal consolidation program that aims to balance the budget by 2008.