Date:
March 2003
53 Percent of Budget for Debt Service Payments
Around
53 percent of the Philippine government's
annual budget goes to the payment of the interest
and principal of its debt, which is ironically
rising because of the faltering peso.
The continuous depreciation of the peso causes
the government's debt to swell by billions
of pesos. This means that the Filipino people
will have to take more money from the national
budget to pay for debt service requirements
in the future.
Senator Ralph Recto explained that the government's
original plan was to allocate amounts for
debt service (principal and interest payments)
based on the 51.5 pesos to a dollar exchange
rate. He added that if the peso further depreciates
to 55 per dollar, the government would have
to shell out an extra P6 billion in currency
adjustments alone for debt allocation.
Of the P804.2 billion proposed government
budget this year, around P425.7 billion or
nearly 53 percent is actually allocated for
debt service. The allocation for debt service
includes P230.7 billion for interest payments
and P195 billion in principal amortization.
For the whole of 2003, the Arroyo government
has committed to pay US$1.436 billion in interest
payments and US$1.682 billion in principal
amortization. Since the amount is to be paid
in US dollars, a slight movement in the exchange
rate would be equal to billions of pesos more
in debt allocation.
Senator Recto estimated that a one-peso depreciation
against the dollar would increase the debt
service by around P3.12 billion.
In 2001, the government's debt was estimated
at P2.88 trillion or 79 percent of the country's
gross domestic product (GDP). The debt is
expected to climb to P3.2 trillion by the
end of 2002 despite the fact that the government
is allocating over 50 percent of its budget
for debt service payments.
Senator Recto said that the government's budget
is bloating by about P1 million a minute,
P57.1 million an hour, and P1.37 billion a
day.
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