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It is
said that there are only two permanent things in this
cruel, cruel world: death and taxes.
In the
merciless world of public finance, there are two
permanent fixtures: taxes and debt. In Philippine public
finance, the tax burden is inexorably rising even as
debt is increasing.
Debt
watch
There
was great rejoicing in the Department of Finance when
national government outstanding debt went down at the
end of 2006. The media closely followed the bold steps
of the Bureau of Treasury as it successively prepaid
expensive dates when interest rates were favorable and
cash was available. Thus, national government
outstanding debt in 2006 stood at P3.852 trillion, lower
than 2005 by P37 billion.
It
seems, however, that it was too soon to rejoice. Since
January to April 2007, national government outstanding
debt has been increasing once more. In four months’
time, the debt stock has risen to P3.900 trillion. The
increase of P48.8 billion has brought us perilously
close to the P4-trillion mark.
Why the
sharp increase in debt stock in 2007? One obvious reason
is the shortfall in revenue collection, which has been
admitted by the Department of Finance. The other is the
tremendous rise in the debt service, as will be shown
below.
How
about the debt service?
The debt
service—interest and principal payments—is of great
interest to the citizens. When it increases
precipitously, the implications on expenditure are
crucial. It means that funds, which could be used for
productive services, are channeled into payment of the
debt.
In 2005
total debt service was at P678.951 billion. In 2006 it
shot up to P854.370 billion. Yes, in one year the
government spent P310.104 billion for interest payments
and P544.266 billion for principal payments.
The
reader might ask, surely, such a huge debt service would
have impacted on the deficit? The deficit for 2006 was
reported at only P64.791 billion.
This is
because the P544.266 billion for principal payments was
not included in the counting of expenditures. The
accounting system of the government considers interest
payments only. This has been a matter of debate between
the Commission on Audit and the Department of Budget and
Management.
On the
other hand, total revenues for 2006 amounted to P979.638
billion. If the total debt service of P854.370 billion
is matched against total revenue, only P125.268 billion
is left for other government expenditures. Obviously,
massive borrowing was resorted to.
It has
been stated that for purposes of calculating total
expenditures and the deficit, only interest payments is
considered. It does not change the fact, however, that
P544.266 billion in cash had to be raised for principal
payment.
Let’s
take a quick look at 2007. As of May 2007, P327.849
billion had already been expended for the debt service.
Of this, P123.163 billion was spent for interest
payments and P204.686 billion for principal payments.
On the
other hand, total revenues for the same period reached
P432.591 billion. This leaves P104.742 billion for other
expenditures. Is it still a wonder that debt is rising?
And now,
for the deficit
The
deficit for 2006 has been reported at P64.791 billion.
Well and good. The reader must be reminded once more
that this deficit figure does not include more than half
a trillion pesos disbursed for principal payments.
As of
May 2007, the official deficit now stands at P41.763
billion. Again, it must be pointed out that only
interest payments of P123.163 billion are considered in
the calculation; P204.686 billion in principal payments
are not included.
Debt and
the myth of Sisyphus
Years
ago, I likened the debt burden of the country to the
rock, which Sisyphus had to push up a hill, only to have
it roll down after reaching the top. For a brief period,
the
Philippines
had the small satisfaction of reducing the debt burden.
The debt is rising again, and Philippines/Sisyphus must
push the rock of debt once more.
Whew!
I’d rather write about happiness.
Good
news from the UP NCPAG
Three
students from National College of Public Administration
and Governance (NCPAG) honored their college and
university when they were sent as delegates to the First
Youth Innovation Competition on Global Governance held
in Fudan University in Shanghai, China, from July 10 to
14.
Diona
Aquino, a graduate student, and undergraduates Paolo
Ante and Ador Torneo were coached by NCPAG faculty
member Dr. Ebbie Florano.
The
team, headed by Aquino, won the Most Valuable Project
Award. The NCPAG team was sponsored by the United
Nations Development Program.
The
competition involved 70 participants from 15 countries,
including the United States, Germany and India. The
topic of the contest was: How to create a global
cooperative system to control greenhouse-gas emissions?
Congratulations are in order. Now to implement the
proposed system….
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