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  • Writer: Ziggurat Realestatecorp
    Ziggurat Realestatecorp
  • Jul 18
  • 6 min read

Yesterday, the broadsheets reported the approval by President Ferdinand Marcos, Jr. of the proposed P6.793-trillion national budget for 2026. Unfortunately, only the headline figures are available as of press time. It’s good the key message appears to be on the right track. The budget is said to be aimed at improving the quality of education in the Philippines and easing the lives of Filipinos.


But no matter how one looks at it, the proposed budget is still substantial as it is higher than this year’s budget of P6.326 trillion by 7.4%. Next year’s budget is some 22% of the country’s gross domestic product (GDP). After all, the Development Budget Coordination Committee had actually scaled down its growth target from 6-8% to only 6-7%. There should be less fiscal support essential to ensure the target is met. All international financial institutions (IFIs) could only go as far as saying that the global scenario this year and the next would be intractable. Trump’s puzzling tariff policy and the Middle East’s fragile proxy war are wild cards. They are known yet they can go whichever way.


Of course, based on the representation by Malacañang, the current budget proposal had descended from the P10.101 trillion original consolidated budget requests of various agencies and instrumentalities of government. Obviously, and this must be a good rationale, the fiscal space is just limited and therefore over 30% had to be trimmed.


At this point, perhaps Malacañang and Congress should consider the cautionary analysis of the U4 Anti-Corruption Resource Center, an independent, non-profit, multi-disciplinary research institute based on Bergen, Norway that the ideal of the public budget process is rarely met. Such an ideal is the allocation of public resources “in a strategic, transparent, accountable, fair and democratic way.”


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Recall that the 2025 budget was previously challenged before the Supreme Court. The petitioners considered it to be the most corrupt budget ever, following the various questionable insertions and politicization of social welfare programs. Nothing was strategic about prioritizing minor and unprogrammed infrastructure projects over public education and public health. Nothing was transparent when the budget outcome was determined by an elite bicameral committee to the exclusion of key players in the budget process. Nothing, or even no one, is accountable when Congress allowed the Finance department to sweep government-owned and -controlled corporations’ (GOCCs) idle funds to cover the unprogrammed appropriations. Nothing is fair and democratic when the so-called idle funds of PhilHealth (Philippine Health Insurance Corp.) were sequestered while the objectives of universal healthcare are barely met; only a small segment of the population and a limited list of health challenges are covered.


It will serve the community’s interest if we hear from the Supreme Court soonest on whether the 2025 budget was a product of a constitutional process. Such a ruling will also be an implicit arbiter of an ideal budget process. Nobody in civil society wants a repeat of the same breach of an ideal budget process in the coming deliberation in Congress after the State of the Nation Address by the President this last week of July.

It will also be interesting to catch the drift of U4’s description of the budget process as “theater” in the worst-case scenario, “with no impact on the real allocation of public money.” U4 was describing the experience in another country where the “theater” actually masked the real distribution of revenues and disbursements.


If the budget process is a theater, let’s see how the Department of Budget and Management (DBM) did the shortlisting of the various requests from P10.101 trillion to P6.793 trillion on the basis of the announced criteria, namely, alignment with the Philippine Development Plan 2023-2028, “shovel-readiness,” absorptive capacity of agencies, and prioritization of programs that deliver the highest value and impact.”

Consider this. Malacañang announced yesterday that “the President himself sat down with the different agencies to ensure that all our priorities are aligned towards our common goal of achieving our vision of a Bagong Pilipinas.” Yet, Budget Secretary Amenah Pangandaman had to reiterate to state agencies “to stick to the agreed budget, and not ask for more once Congress deliberates on the 2026 National Expenditure Program (NEP).”


Is she afraid of the flexibility for theatrical maneuvering in Congress, Senate, and in the bicameral committee?


Ms. Pangandaman’s appeal should no longer be necessary, unless the process of elimination started and ended with her budget staff. By her own admission, though, she also disclosed that she had “been sitting down with department secretaries to check that they agree with their budget levels and priorities.” But Ms. Pangandaman’s appeal reveals a wish “that they won’t ask for more.” If the prioritization involved the agencies themselves at staff, secretary, and no less than the level of the President, what is implicit here is that the DBM itself is afraid the agencies may not keep to what has been agreed upon as to their respective agencies’ budgets. Knowing the officers and members of the Appropriations Committee is as good as having one’s foot in the door of budget additionality.


So, with whom did the President confer in pruning down the budget from P10.101 trillion to P6.793 trillion?


How well will the initial allocations hold?


An agency level breakdown is not yet available, but some other initial figures were disclosed to the public. For instance, maintenance and other operating expenses (MOOE) will get P2.639 trillion or 38.8% of the budget. Other objects of expenditure include personnel services (PS) at P1.908 trillion, or 28.1%; capital outlay, P1.296 trillion or 19.1%; financial expenses, P950 billion. By levels of government, the National Government agencies get P4.305 trillion or 63.4% and local government units will be allocated P1.350 trillion or 20%. GOCCs will be getting P188.3 billion in subsidy or equity support as well as net lending support.


One thing we all know at this point is that the fiscal space is indeed very tight.

In the last four years, the country’s fiscal deficit averaged over P1.5 trillion, with a deficit to GDP ratio ranging from a low of 5.7% in 2024 to a high of 8.6% in 2021. For the first quarter of 2025, the fiscal shortfall remained substantial at 6.8%. In fact, in the first five months of the year, the fiscal deficit already stood at over half a trillion pesos.

How this will be trimmed from a programmed deficit to GDP ratio of 5.5% this year to 4.3% by 2028 may be at best an aspirational target. Revenues have been quite steady at around 15-16% of GDP while expenditures have been way above, at more than 22%. With a presidential elections coming up in three years, it is to the interest of the ruling class to keep expenditure high — for infrastructure to keep the economic momentum strong, social services to develop our human capital and keep the living standards of the Filipinos more decent, for innovation to keep productivity rising and all productivity drags under control, not to mention the cost of winning votes.


But fund sourcing is equally stretched. Public finance is in a bind.


Increasing the tax effort ratio of around 14% of GDP could win or lose elections, especially when the nature of the tax imposed, or the rate to be collected, is not exactly popular. Borrowing could be the measure of last resort, but the National Government’s total outstanding loans are inching towards worrisome levels relative to GDP. Loans rose precipitously from P7.7 trillion before the pandemic to P16.1 trillion in 2024. At end-May 2025, the level further pushed to P16.9 trillion. When all the figures become available for the second quarter, we expect the ratio to exceed 62% of GDP.


Are we prepared then to tax wealth; collect levies on texting; collect on some families’ tax liabilities to the  Bureau of Internal Revenue  (BIR); clean up the BIR, Bureau of Customs, and other public agencies notorious for corruption, once and for all; prohibit automobile purchases unless people pay for the right to buy, which is anchored on the availability of a parking garage; implement the Supreme Court’s decision on pork barrel; and revise our legal framework on land aggregation and use?


If we are ready to bite the bullet, then we should be prepared to do away with the theatrics in the budget process.


The World Bank’s recent projection about the Philippines’ likelihood of hitting as much as 6.8% annually is not something we simply receive and not do anything to make it happen. If we listen to the World Bank’s presentation, and read carefully the press report, it is quite clear there are at least four reforms we need to do, and this has been the recurrent messages in the government’s report, the IMF Article IV consultation, ADB diagnostics, and in everything else that matters: strengthen infrastructure, improve human capital, enhance competition, and attract more private investment.


Unfortunately, in many of these official reports, one very important ingredient of accelerated, sustainable and innovative development is missing: good governance.

Good governance could very well secure all those reforms at the least cost, and without the theater of the budget process. Let’s get real this time.


 
 
 
  • Writer: Ziggurat Realestatecorp
    Ziggurat Realestatecorp
  • Mar 17
  • 3 min read

From being blacklisted in 2000 to greylisted in 2021, the Philippines has made significant strides in its battle against financial crimes. In a remarkable turnaround, the country has now reached a pivotal milestone: removal from the Financial Action Task Force (FATF) monitoring list.


This achievement was announced on Feb. 21, 2025, marking a new chapter in the Philippines' commitment to financial integrity and global security. The country's journey through the FATF listings has been challenging, marked by cycles of blacklisting and grey-listing.


Initially blacklisted in the early 2000s due to the absence of a strong Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legal framework, the Philippines took its first step toward reform with the pas-sage of Republic Act 9160, also known as the Anti-Money Laundering Act of 2001.


This led to the country's removal from the blacklist in 2005. However, achieving full compliance was still challenging. Between 2008 and 2021, the country's listing status varied, often due to concerns about counter-terrorist financing laws and other regulatory gaps.


Despite these challenges, the Philippines showed resilience. In response to its 2021 greylisting, the country implemented a comprehensive action plan to address key AML/CFT deficiencies. It involved strengthening supervision of designated nonfinancial businesses and professions, cracking down on illegal money transfers, improving law enforcement's access to beneficial ownership information and safeguarding nonprofit organizations from misuse.


The collaborative efforts have led to the Philippines' removal from the greylist, highlighting the country's commitment, through the Anti-Money Laundering Council, to combating financial crimes and strengthening global financial security.


It must be emphasized that the Philippines' removal from the FATF greylist is more than just a symbolic victory. It signifies an exceptional strengthening of the country's financial system. For businesses and financial institutions, this development brings immediate and tangible benefits.


One of the most notable advantages is the reduction in the need for enhanced due diligence on cross-border transactions, which not only lowers operational costs but also streamlines processes. Moreover, the easing of reporting requirements also reduces administrative tasks, allowing entities to use resources more efficiently.


This makes the country's financial system more attractive to international investors, enhancing the Philip-pines' competitiveness. This shift is especially significant given the well-documented negative effects of grey-listing: studies indicate that countries on the FATF greylist often experience a decline in gross domestic product (GDP), reduced foreign direct investment (FDI) inflows and a lower FDI-to-GDP ratio.


For the Philippines, reversing these effects will pave the way for a more resilient and dynamic economy. Moreover, the removal from the greylist will help streamline and reduce the cost of remittance processing, providing direct benefits to overseas Filipino workers (OFWs).


With fewer regulatory hurdles and faster transaction times, OFWs will be able to send more of their hard-earned money back home, further improving their financial well-being. While the Philippines' removal from the FATF greylist is a remarkable feat, it is only the beginning of a long-term commitment to maintaining financial integrity.


To avoid future relisting, the country must keep enforcing strong measures to tackle emerging financial crime trends. Drawing from nearly 25 years of experience in exiting the FATF watch list and learnings from countries with strong, consistent AML/CFT frameworks — such as Australia, Canada and several EU nations — will be crucial.


This includes enacting forward-thinking legislation to stay ahead of emerging threats, reinforcing the enforcement and prosecution of financial crimes and conducting thorough national risk assessments to identify and address specific deficiencies.


Additionally, maintaining risk-based supervision across all sectors and fostering collaboration between the government and private sectors in implementing AML/CFT measures will be essential. Above all, maintaining strong political commitment to AML/CFT as a national priority will be crucial for protecting the country's financial system in the long term.


The key takeaway is that the Philippines' successful exit from the FATF greylist underscores the collective commitment of all stakeholders to maintaining a transparent financial system.


This achievement has boosted investor confidence and contributed to a more dynamic global market. How-ever, maintaining this success will require continuous compliance, proactive measures and the ability to adapt to emerging threats.


By doing so, the Philippines will ensure the long-term stability and resilience of its financial system.


Source: Manila Times

 
 
 

The Philippines is headed in the right direction in terms of becoming a more conducive business environment, the Chandler Institute of Governance (CIG) said.


“The attractive marketplace (pillar) is about the capabilities that the government has to create a conducive business environment,” Kenneth Sim, dean at Chandler Academy of Governance, a Singapore-based public-sector training organization, said in an event organized by CIG and the Eastern Regional Organization for Public Administration.


“Relative to peers, the Philippines doesn’t do as well. But the gap is closing, and in the right direction, which means the Philippines is actually catching up to the global average,” he added, citing comparable economies like Vietnam and Egypt.


Citing results of the Chandler Good Government Index (CGGI) in 2024, Mr. Sim said that the Philippines posted a 0.56 marketplace attractiveness score last year, up from 0.53 in 2023. The global average is 0.58.


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“Part of the reason why this is improving is the stable macroeconomic environment, which looks at things like inflation, as well as the other one that has improved, which is logistics competence,” he said.


Some key indicators for an attractive marketplace, like property rights and business regulations, are below the global average.


In particular, the country scored 0.39 in stability of business regulations, against the 0.51 global average. It scored 0.30 in property rights, against the 0.50 global average.

Mr. Sim noted opportunities to improve in the leadership and foresight components of the index.


“Over the years, there has been a decline in the score for the Philippines. It started at just above 0.4 in 2021, and by 2024, the Philippines will have dropped to 0.33. So this means, again, that the gap between the Philippines and the global average has been widening,” he said.


“It is important to point out, however, that even though we call it leadership and foresight, it is not about individual leaders; it is about the ability of the system to develop these capabilities,” he said.


“Of course, leaders play an important role, but this pillar is not about people. It is about the system,” he added.


“The performance of the Philippines in the CGGI in 2024 is somewhere in the middle. 67th out of 113, not the best, but certainly not the worst,” Mr. Sim said.

He added that although the country’s rank has suffered, its score has declined only slightly.


“What this means is that over time, relative to itself, in your own country, you have kept your performance relatively stable, but the rank has fallen, which simply means that more people are joining the index, and others are doing even better,” he said.


“So, staying in place and being patient is not going to help you to improve in ranking,” he added.


He said that the Philippines is stronger in areas like strong institutions and financial stewardship.


 
 
 

© Copyright 2018 by Ziggurat Real Estate Corp. All Rights Reserved.

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