DOF: 12.1% of proposed P5.768-T budget earmarked for debt payments

The Department of Finance (DOF) on Tuesday said that the government has earmarked 12.1% or P699.2 billion of the proposed P5.768 trillion national budget next year to finance payment of obligations or debt burden.

“When assessing the debt burden component of the budget, it is crucial to solely consider interest payments and net lending,” Finance Secretary Benjamin E. Diokno said in a statement.

Net lending refers to advances by the national government for the servicing of debt.

Meanwhile, Diokno said interest payments (IP) have been declining, “freeing up fiscal resources which can be reallocated to support the government’s priority programs.”

DOF data shows that from 1986 to 2015, the average share of IP to the total national government expenditures was at 23.3% and further declined to an average of 10.1% from 2016 to 2022.

“For 2024, the allocation for interest payments is only 11.6% or P670.5 billion of the 2024 budget. This allows us to spend more on socioeconomic programs and projects in our priority sectors such as education and infrastructure,” Diokno said.

The Finance chief also maintained that under any accounting standard, the principal amortization of debt is not included in the expense item since it is not classified as expenditure, hence it is not automatically appropriated.

“The settlement of debt obligations incurred from expenses were already recorded in the past. Therefore, principal amortization only represents the fulfillment of financial responsibilities arising from previously recorded expenses,” he said.

He added that since it is already an existing obligation, principal amortization does not result in any additional debt.

“If any, the responsibility for the debt is just moved from the previous lender to a new lender during the refinancing process. As a result, this does not add to the debt burden,” Diokno said.

He added that since principal payments are merely settlements of liabilities incurred in the utilization of appropriations programmed in prior years, recording it again as expenditures would result in double counting of appropriations.

The Finance chief said the Marcos administration’s economic team remains committed to implementing the Medium-Term Fiscal Framework (MTFF), which serves as the government’s blueprint for bringing down the country’s debt-to-GDP ratio from 60.9% in 2022 and to less than 60% by 2025, cutting the deficit-to-GDP ratio to 3% by 2028, and maintaining infrastructure spending at 5% to 6% of GDP.

As of the first quarter of 2023, the country’s debt-to-GDP ratio was recorded at 61%, down from the 63.5% ratio in the first quarter of 2022.

The debt-to-GDP ratio represents the amount of the government’s debt stock relative to the size of the economy.

As of end-June, the country’s total sovereign debt stock reached a record P14.15 trillion as the government boosted borrowing efforts to support its financing requirements. 

“Through the continuous implementation of improvements to tax administration and efficiency and implementation of key tax reforms, the government is confident that revenue collections will continue to increase and the deficit will narrow on the back of a strong economy,” Diokno said.

“We would like to thank Congress for its continuous support on the MTFF legislations and for the ongoing work on the remaining revenue measures,” he said. —VAL, GMA Integrated News