RP'S DEBT SERVICE COST UP TO P542-B IN '04, OUTSTANDING DEBT UP TO P3.25-T
MANILA, August 18, 2003 (STAR) By Des Ferriols - The country’s debt service cost is expected to reach P542.2 billion in 2004 from the programmed P425.7 billion this year as the government’s outstanding debt increases to P3.25 trillion next year.
Based on a report from the Department of Finance (DOF), debt service costs would increase steadily as the country resorts to more borrowing in order to bridge its yawning budget deficit.
For 2004, the country’s budget deficit is expected to decline to P197.8 billion from the P202-billion target this year.
At this level, the 2004 budget gap will be 3.9 percent of gross domestic product (GDP) which is lower than 4.4-percent rate in 2003.
Consequently, the government’s financing requirement is also expected to decline to P141 billion next year from this year’s P198.6 billion. Despite these declines, however, government sources said the country’s debt service costs will continue to increase.
This year, the DOF estimates that the amount of resources spent on debt servicing would be equivalent to 9.9 percent of GDP. This is expected to increase significantly to 11.5 percent of GDP by 2004.
This meant that instead of being plowed back into the economy, almost 12 percent of the country’s economic production would go into debt repayment.
DOF data show that of the amount programmed for debt service in 2004, about P271.5 billion would go to interest expense, up from the programmed P230.7 billion in 2003 and P185.9 billion that was actually spent in 2002.
This amount, according to DOF estimates, accounts for 31.2 percent of total 2004 expenditures.
The government plans to spend P270.7 billion for principal payments in 2004, equivalent to about 5.8 percent of GDP.
This represents an increase from P195 billion or 4.5 percent of GDP in 2003.
"We can’t lose sight of the fact that the underlying problem is the deficit," Finance Secretary Jose Isidro Camacho said. "We have to be able to reduce the deficit through fiscal discipline and improvements in tax administration to increase revenues."
Camacho has repeatedly warned that the country would be facing a debt crisis if drastic steps were not taken to reduce debt, reduce the national deficit and ultimately cut down on future borrowing.
Reported by: Sol Jose Vanzi
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