Government budget utilization slows to 42% as of end-January

By Justine Irish D. Tabile, Senior Reporter

Government agencies recorded a budget utilization rate of 42.2% in January, down from 78% a year earlier, the Department of Budget and Management (DBM) said.

In a Notice of Cash Allocations (NCAs) Utilization report, the Budget department said agencies used a total of P136.29 billion during the month out of the P322.67 billion worth of NCAs released during that period.

Unused NCAs amounted to P186.38 billion, as of the end of January.

NCAs are quarterly disbursement authorities issued by the DBM to agencies, allowing them to withdraw funds from the Bureau of the Treasury for their spending needs.

In January, line departments used P132.87 billion, or 62.7% of their allotments, while P79.17 billion remained unused.

The Commission on Elections posted the highest utilization rate of 97.6% at the end of January.

This was followed by the Commission on Audit (95.1%), Department of Foreign Affairs (90.9%), Department of Tourism (89.5%), and the Department of National Defense (78.7%).

The Department of Labor and Employment posted the lowest utilization rate of 20.2% at the end of January.

The other departments with the lowest utilization rates were the Office of the Ombudsman (31.6%), the Judiciary (31.9%), the Office of the Vice-President (34.8%), and the Department of Information and Communications Technology (38.3%).

Budgetary support to state-run firms, amounting to P3.36 billion, was fully utilized as of the end of January.

Allocations to the local government units (LGUs) were only 0.1% utilized, while Metropolitan Manila Development Authority had a 30% utilization rate.

Budget watchdog Social Watch Philippines (SWP) attributed the low January utilization rate to the delay in the signing of the 2026 General Appropriations Act (GAA).

“Budget utilization depends on two major factors: the absorptive and technical capacity of agencies, and the timing of allotment and cash allocation releases by the DBM,” SWP Senior Budget Analyst Alce C. Quitalig said in a Viber message.

“The delay in signing the 2026 GAA likely contributed to the low NCA utilization by end-January 2026, driven mainly by 0.1% disbursement of the allocation to the LGUs, largely from their respective National Tax Allotment (NTA),” he added.

He said that a similar event occurred in 2019, where only 0.2% of the NCA releases of allocation to LGUs were disbursed in the first month of that year.

“But allocation to LGUs typically record over 90% spending in other years. The year-on-year drop is clearly due to unspent LGU cash allocations,” he added.

Meanwhile, Mr. Quitalig said that the 62.7% utilization rate among national government agencies, which was lower than the 70% seen in January 2025 is consistent with the four-year average of 63% and the historical low utilization trend of just above 60% since 2016.

“End-January figures should be viewed in context, nonetheless, as agencies are still setting up spending systems early in the year. NCA utilization generally improves in succeeding months, as attested by the cumulative NCA utilization monthly flow trend,” Mr. Quitalig said.

“But departments and agencies with persistently low January performance must strengthen their spending, especially on regular programs, projects, and activities, to ensure timely delivery of public goods and services,” he added.

However, Mr. Quitalig raised concerns whether spending improvement schemes implemented by the government have truly strengthened agencies’ absorptive and technical capacity or have hindered their spending performance.

“Evaluating budget reforms aimed at expediting public spending is crucial. While budget utilization is understandably modest in the first month of the year, improvements should have happened post-pandemic,” he said.

“Yet the persistently low end-January NCA utilization of the departments and agencies raises doubts about the effectiveness of spending improvement schemes such as cash-based budgeting system, GAA-as-release document and early procurement policies,” he added.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the low utilization rate to the spillover effects of government underspending since the latter part of 2025 due to the anomalous flood-control projects.

“There is still caution on government spending to prevent risk of corruption,” he said in a Viber message, but noted that the national budget that was signed on January 5 was already based on better governance standards compared to previous years.

“Going forward, the government spending is expected to catch up, especially on infrastructure to make up for the underspending in the second half of 2025, but, more importantly, based on anti-corruption measures and better governance standards,” he added.

However, John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said that a low utilization rate in January is not unusual.

“It can be attributed to several factors such as post-holiday normalization, weaker new orders, input and cost pressures, and external uncertainty,” he said in a Viber message.

“At 42.2%, utilization is not alarming … it is a normal slowdown,” he added.