Friday, December 28, 2007

Debt Servicing vs Social Services

Savings from strong peso should be used for services

Senate Minority Leader Aquilino Pimentel Jr. has urged the government to divert or add to the existing budget allocated for social services the savings from the strong peso. The strong showing of peso against the dollar has given government bigger elbowroom in the budget, with some P12 billion in savings, and still counting from over-allocation of debt service which was computed on a higher dollar exchange rate. In a study, the budgetary watchdog Freedom from Debt Coalition (FDC) reveals an average difference of P12.15 billion between programmed and actual interest payment expenses from 2002 to 2007. The FDC study also shows that P204.62 billion was earmarked for in­terest payments in 2002, but actual pay­ment reached only P185.861 billion.The same trend for debt service payments was shown in subsequent years: P271.53 billion earmarked in 2004 against actual payments of P260.9 billion; P301.69 billion in 2005 against actual payment of P299.8 billion, and P339.99 billion in 2006 against actual payment or P310.1 billion.FDC data revealed that the reduct­ion of interest payments by adjusting the exchange rate to a more realistic level, and by suspending payments for proposed program project loans "would already account for as much as P18.85-billion debt service reduction, about a billion pesos more than the P17.8-billion reduction by the House of Representatives.""Surely, this is more than enough to cover for interest payments for illegitimate debts should negotiation and/or debt condonation fail," the FDC said. The FDC has estimated that actual interest payment will decline by as much as P18.85 billion in 2008 if a more realistic exchange rate will be adopted.Pimentel noted that for 2006, the excess in programmed interest payment expenses even reached as high as P28.9 billion.This year, the government has originally set aside P318.18 billion for interest payment, but budget authorities have scaled down the amount to P303.3 billion due to the peso appreciation.The senator said the government should exercise restraint in appro­priat­ing funds for debt service so as not to sacrifice economic and social services which are always short of funding support. Civil society organizations be­longing to Alternative Budget Initiative recently serenaded the bicameral conference committee on Finance to seriously consider in their delibera­tions of the 2008 budget the proposal to allocate P20 billion more for social expenditures and reduce debt payments. The group, who were wearing Santa hats, sang their demands to the tune of Filipino Christmas songs demanding more funds for education, health, environment and agriculture while appealing for transparency on the deliberation of the General Appropriations Act of 2008. For 2008, Pimentel noted that the government has projected debt-service interest payments at P295.75 billion, of which P109.1 billion will go to foreign lenders and P186.7 billion to domestic lenders.However, Pimentel said the amount allotted for interest payment this year has been computed between P46 up to P48 to the US dollar exchange rate, which was the rate several months ago. The current exchange rate is now below P41.51 to the dollar.

The Manila Times

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