Jude Galford III
August 29, 2005
More than a third of the proposed P1.05-trillion 2006 national budget has been earmarked for foreign debt interest payments amounting to at least P931 million daily, Sen. Manny Villar, chairman of the Senate Committee on Finance, said yesterday.
Around one-third or P344.4 billion of the 2006 budget will go straight to interest payments on foreign debts, Villar added.
“Debt servicing continues to corner the bulk of the country’s yearly budget and revenues to the detriment of allotment for social services for the people. The health, education and social welfare sectors have to take a backseat to interest payments. This vicious cycle has got to stop once and for all,” he said.
Villar reiterated his recommendation for the government to exhaust all possible means to drastically reduce the country’s massive debts.
Villar had filed Senate Bill 1928 which seeks “to create a council for debt relief to review bilateral and multilateral loan agreements and treaties entered into by the Philippine governments and invoke the relevant privileges that would facilitate cancellation of odious debt and/or restructuring of debts to ease debt payments.”
“The increasing share of debt service payments in the yearly national budget is at the expense of decreasing allotment for social services and infrastructure,” he said.
Under the proposed 2006 budget, the following budgets are allotted for key government departments: Department of Education, P119.1 billion; Department of Public Works and Highways, P62.3 billion; Department of National Defense, P51.6 billion; Department of Interior and Local Governments, P45.6 billion; and Department of Agriculture, P15.6 billion.
Recto: Daily interest payments will pass P1B mark next year
Government’s daily interest payments will likely exceed the P1-billion mark next year, and not stay at P931 million as stated in the proposed P1.053 trillion 2006 national budget, Sen. Ralph Recto said yesterday.
As to principal payments, the P1.045 billion a day level mentioned in the same document will also increase substantially, Recto predicted.
Recto based his forecast on the P28.2 billion difference between the budgeted debt service fund this year and actual debt repayments.
In the 2005 national budget, the projected interest payment was P301.7 billion.
“But in the 2006 budget documents submitted to Congress, that amount has increased to P313.4 billion, or by P11.7 billion,” he said.
“In the case of principal payments, the government budgeted P344.2 billion for this year, but this amount has been adjusted to P360.7 billion, or an increase of P16.5 billion,” he said.
“There’s a difference between what’s written in the law and the actual money that leaves the treasury,” Recto said.
“So what we can deduce from the above is that debt service allotments for the next year are at best estimates. Historically, they tend to go up, not down,” he said.
“In this year’s case, we are paying P2.4 billion more a month than what has been projected,” he said. “So next year, when government says it will limit its annual interest payments to P340 billion, we’ll be lucky if it will stay at around P350 billion.”
In another development, Sen. Miriam Defensor Santiago yesterday hit debt servicing as the main source of poverty among poor countries, including the Philippines, amid reports that the government will set aside daily P931 million in interest payments under the 2006 budget.
“The Philippines is caught in the debt trap. We are trapped in the national effort to pay interest on the foreign debt. Last January, when we were deliberating over the 2005 budget, interest payments forced the Senate to divert most of the meager Philippine funds that should have been allocated to health, education, and food security,” she said.
The senator pointed out that according to reports of the UN Children’s Fund (UNICEF), the poor and their children are bearing the cost of the structural adjustment programs dictated by the World Bank and the IMF, which include tax increases, salary cuts, and currency devaluation.
“It appears that from what the Philippines has paid in debt service, we have already repaid twice our external debt. Further, we have paid our foreign creditors five times more in debt service than we have received as official development aid, or ODA,” Santiago said.