Govt to spend P1.7 billion a day for debt service next year

Government will spend P1.704 billion a day next year in interest and principal payments on its P4 trillion debt, Sen. Ralph G. Recto said today.

Six and half days of debt service is what we will spend for the Department of Health the whole of next year, he said, in stressing the the heavy debt load we continue to bear.

Recto said interest payments are pegged at P318.2 billion next year while the amount for principal amortization is set at P303.8 billion, or a gross debt service program of P622 billion.

Interest payments, with a 29 percent share, remain the biggest account in the proposed P1.136 trillion 2007 budget. DepEd plays second fiddle to debt service.

The Department of Education has a budget of P133 billion next year, or, by Rectos computation, equivalent to two and half months of debt service.

As to next years P318.2 billion interest payment bill, P117 billion of this will be used to settle foreign obligations while P201 billion will be for domestic creditors.

As to the P303.8 billion budgeted for principal amortization, P232.2 billion of this is earmarked for domestic obligations and the rest P71.6 billion is programmed for foreign liabilities.

Recto, however, conceded that there is big drop in the allocations for debt service. All the numbers are going down.

Our gross debt service for 2007 of P622 billion is P100 billion less than this years level of P721.7 billion, Recto said.

As a result, the debt meter will be ticking a little bit slower, from P1.976 billion a day this year to P1.704 billion a day next year. We will be freeing about P270 million a day for productive expenditures, he said.

The biggest dip will be in principal amortization, which will be slashed from P381.7 billion this year to P303.8 billion next year.

Interest payments will be reduced, too, to P318.2 in 2007 from P340 billion this year.

Next year will be the first time in 12 years when the interest payments will decrease and it appears that it will be treading the downward slope from then on, Recto said.

Recto credited the dip in debt service to good tax laws passed by Congress and the good revenue performance by the government.

He said the budget space created by declining debt service should be used for social and economic services. Amounts that should have been remitted to our creditors should now be used to finance a catch-up plan in closing gaps in health, education, agriculture, roads, technology and shelter needs, Recto said.