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Wednesday, December 28, 2005
Oledan: Survival budget
By Radzini Oledan
Slice of Life
THE budget for 2006 could be considered as a survival budget, one that reflects the priority of the national officials amidst the worsening economic and political condition. Debt servicing still remains to be the priority in the 2006 national budget. Close to 30 percent, will still go to paying interest on public debt, followed by spending on education at 13.9 percent, and on communications, roads and other transportation at 6.8 percent.
A closer look into debt service payments for interest alone would show that it had been increasing since 1997, when they were 15.9 percent of total expenditures. Between 2001 and 2004, the share of debt service to total expenditures increased by 9.4 percentage points, compared to an increase of only 8.8 percentage points between 1997 and 2001.
Total debt service payments have risen almost three-fold from P274.4 billion in 2001 to a projected P721.7 billion in 2006, which is equivalent to 68.5 percent of the total expenditure program for the year. This also means some P2 billion pesos in total debt payments each day.
These trends should not be surprising, given the skyrocketing public debt. As of August 2005, total outstanding National Government debt was at P3.94 trillion, a 66 percent increase from its P2.38 trillion level in 2001. This is equivalent to some P46,244 of debt for each of the country's 85.2 million Filipinos.
The primacy of debt servicing in the budget is underlined further when principal payments for the National Government debt are factored in. Only interest payments are included in the national budget; only principal payments are an "off-budget" item found in a separate set of accounts called the National Government Sources of Financing.
In the 2006 budget, total debt service will be: five times that of education spending (P146.5 billion); 53 times that of health spending (P13.7 billion); and 262 times that of housing spending (P2.8 billion).
Conversely, spending on social services has been going down. Examining trends from 2001 to 2006, the share of education to the total budget has fallen from 17.4 percent to 13.9 percent, of health spending from 1.9 percent to 1.3 percent and of housing spending from 0.4 percent to 0.3 percent.
Ideally, the national budget can be a powerful mechanism for ensuring that public resources are used for the welfare of the majority. Government revenues, mainly generated through taxes, can be used for vital economic, social and public services.
Unfortunately, the interests of the few have perpetually hijacked the direction of our economic policy, which is fully reflected in the national budget.
The 2006 proposed budget continues to favor the interests of commercial banks and multilateral agencies that hold the country's debt despite popular calls for a more progressive debt management policy, which involves the cancellation of the most odious debts and a debt cap on payments and new borrowings. With the people suffering from intensifying poverty, falling incomes, rising prices and high level of joblessness, it expects the national government to at least mitigate the impact of these wrong directions.
But it cannot. The national budget shows the need for the current leadership to craft a national budget towards gaining investor and creditor confidence. Their political survival is at stake.
For Bisaya stories from Davao. Click here. (December 28, 2005 issue)
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