UMVA has learned that a critical examination of the government's budgetary maneuvers has raised serious questions about the creation of "artificial" fiscal space in the national budget.
The Supreme Court has expressed doubts about the government's argument that transferring already funded foreign-assisted projects to unprogrammed appropriations is deficit-neutral. This development has significant implications for the country's financial management.
During the continuation of oral arguments on consolidated petitions challenging the unprogrammed appropriations and special accounts in the 2024, 2025, and 2026 General Appropriations Acts, Associate Justice Amy C. Lazaro-Javier cited a paper written by Budget Secretary Kim Robert C. de Leon in 2025. The paper shed light on the potential consequences of moving loan-funded portions of foreign-assisted projects to unprogrammed appropriations.
The justice noted that such a move could ultimately require additional government borrowing. "In reality, the transfer covers not only the project but also the transfer of the fund itself," she said. "So whatever space in the programmed appropriation that seems to have been created by the transfer is merely artificial."
The Solicitor General, Darlene Marie B. Berberabe, agreed that theoretically, the government's position could lead to additional borrowing. However, the government's stance is that when a foreign-assisted project is transferred to unprogrammed appropriations, both the project and its funding source should be transferred.
Budget Assistant Secretary Romeo Matthew T. Balanquit confirmed that the loan funding follows the project once it is transferred to unprogrammed appropriations. "It's true that once you transfer an ongoing foreign-assisted project to the unprogrammed appropriations… the corresponding funding source, which is the loan, [goes with it]," he said.
The Supreme Court's concerns centered on the potential impact on the national budget. The court questioned how unprogrammed appropriations could still be considered deficit-neutral if the government would eventually have to finance projects inserted into the programmed budget after funded foreign-assisted projects were transferred out.
The court's hearing stems from consolidated lawsuits questioning the constitutionality of provisions on unprogrammed appropriations and special accounts in the national budgets. The next round of oral arguments is scheduled for July 14, leaving many to wonder about the future implications of this critical examination.
