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Tuesday, April 29, 2003
Villar files measure to fix RP's debt stock
SENATOR Manuel Villar Jr., chair of the Senate committee on finance, proposed that the country's debt servicing shall not be allowed to go beyond five percent of the previou's years gross domestic product (GDP).
Villar filled Senate Bill No.2549 or "An Act Fixing the Debt Stock of the Republic of the Philippines" which would allow the national government to maintain a total debt stock not exceeding 75 percent of the previous year's GDP.
He said setting the maximum debt-to-GDP nation at 75 percent would not mean that the national government's debt stock would automatically decline since the economy is growing.
"But as an upper limit, the national government will be constrained to exercise greater prudence in its borrowing program without limiting its choice of funding source, whether domestic or foreign," he said.
Villar said the country's total debt stock has grown to P2.385 trillion in 2001, or an annual growth rate of 13.37 percent from P600 billion in 1990.
He said interest payments have ballooned to P175 billion ion 2001, or an 8.5 percent annual growth rate form P71.1 billion in 1990.
"To minimize the prosperity of fiscal authorities to borrow and instill greater discipline and prudence in public spending and revenue generation, there is a felt need to set a limit on the size of the national government's debt stock in relation to GDP," he said.
According to Villar, the rapid escalation in the debt stock has exerted a tremendous pressure on the government's fiscal management.
He said the upsurge in debt servicing has limited the capacity of the national government to boost the economy through increased productive spending.
This is made more difficult when revenue collections are soft. An easy way out is for the fiscal managers to resort to borrowings," he said. "There is nothing wrong with this, except when it reaches a point, where the huge debt stock begins to gobble an increasing share of the scare budgetary resources for debt service payments, leaving relatively less for socio-economic spending."
(April 29, 2003 issue)
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