By Justine Irish D. Tabile, Senior Reporter
THE NATIONAL Government’s (NG) budget deficit widened more than fivefold in July as spending jumped nearly 20% driven by higher disbursements for social assistance and capital projects, the Bureau of the Treasury (BTr) said.
The fiscal gap ballooned by 461.73% to P106.3 billion in July from P18.9 billion in the same month a year earlier, Treasury data showed.
Month on month, the deficit narrowed by 59.8% from the P264.3-billion deficit in June.
The BTr said expenditures rose by 19.82% as the government ramped up disbursements for key programs and projects, while a base effect-driven decline in nontax collections limited revenue growth to 2.12%.
Government spending increased to P588.6 billion in July from P491.2 billion a year ago, mainly due to the implementation of various social assistance programs under the Unified Package for Livelihood, Industry, Food, and Transport framework to help address the impact of the Middle East conflict.
Disbursements for capital outlay projects under the Revised Armed Forces of the Philippines Modernization Program and direct payments made by development partners for various foreign-assisted rail transport projects of the Department of Transportation also drove faster spending.
Primary expenditure (net of interest payments) went up by 17.25% to P451.4 billion in July from P385 billion in the same month last year. It accounted for 76.69% of total disbursements.
Interest payments increased by 29.14% to P137.2 billion in July from P106.2 billion a year prior.
“This was attributed to coupon servicing on additional domestic debt securities and global bonds, as well as the impact of foreign exchange fluctuations on foreign-currency payments,” the BTr said.
On the other hand, total revenue collections inched up by 2.12% to P482.3 billion in July from P472.3 billion in the same month a year ago.
Tax revenues, which accounted for the 93.86% of total collections, rose by 7.02% to P452.7 billion in July from P423 billion a year ago.
The Bureau of Internal Revenue’s (BIR) collections increased by 6.92% to P358.4 billion in July from P335.3 billion a year prior. Collections by the Bureau of Customs (BoC) jumped by 7.48% to P91.6 billion in July from P85.2 billion a year earlier.
Nontax revenues declined by 39.92% to P29.6 billion in July from P49.3 billion last year, as Treasury income plunged by 48.31% to P18.8 billion and revenues from other offices fell by 16.38% to P10.8 billion.
The Treasury attributed the decline mainly to the timing of dividend remittances by the Bangko Sentral ng Pilipinas (BSP). The BSP remitted P59 billion in February and P3.4 billion in July this year, compared with P18.9 billion in July 2025.
In July, the NG recorded a primary surplus of P30.9 billion, narrowing by 64.59% from the P87.3-billion surplus a year earlier.
SEVEN-MONTH BUDGET GAP
For the January-to-July period, the fiscal gap widened by 13.85% to P893.1 billion from the P784.4-billion deficit last year, BTr data showed.
This represented 53.84% of the upwardly revised P1.659-trillion deficit ceiling approved by the Development Budget Coordination Committee (DBCC) in May.
Total revenue collections rose by 5.05% to P2.87 trillion in the seven-month period from P2.73 trillion recorded in the same period a year ago. This represented 59.72% of the P4.807-trillion program for the year.
As of end-July, tax revenues increased by 5.66% to P2.595 trillion, as BIR collections went up by 5.31% to P1.99 trillion and Customs collections rose by 7.25% to P583.4 billion.
“The BIR’s improved performance is due to better taxpayer services to support stronger compliance and boost collection,” the Treasury said.
Meanwhile, the BTr said that the increase in BoC collections was driven by “the significant uptick in duties and value-added tax (VAT) collection from imports primarily due to the stronger US dollar and higher crude oil price.”
“In addition, the agency’s sustained collection was supported by improved customs procedures, intensified border protection measures, digital transformation initiatives, and closer collaboration with stakeholders,” it added.
Nontax revenues slipped by 0.31% to P276.1 billion as of end-July, as a 10.97% increase in BTr income to P201.5 billion partly offset the 21.78% drop in other offices’ revenues to P74.6 billion.
For the seven-month period, expenditures increased by 7.02% to P3.764 trillion from P3.517 trillion a year ago. This accounted for 58.21% of the DBCC’s P6.466-trillion disbursement program.
The primary budget deficit widened by 3.36% to P272.2 billion in the first seven months from P263.4 billion in the same period last year.
Francisco Cid L. Terosa, an associate professor and former dean of the University of Asia and the Pacific School of Economics, said the widening deficit could be attributed to greater cash disbursements and expenditures relative to revenue collections.
“Revenue growth was slow due to the economic slowdown in the first half of 2026. Slower consumer spending and capital formation led to sluggish VAT and excise tax collections,” he told BusinessWorld in a Viber message.
“Corporate income tax collections were impeded by slower corporate expansion and downscaled business activities,” he added.
In the first half, the Philippine economy grew by just 2.6%, much slower than the 5.4% expansion a year ago, as elevated inflation dampened household consumption while a steep decline in public construction dragged investment.
“The deficit will continue increasing due to elevated deficit targets by the government, prioritization of public spending and infra rollout to revitalize the economy even if it leads to a larger deficit, and slower forecasted GDP (gross domestic product) growth,” Mr. Terosa said.