MANILA, June 10, 2005
 (STAR) By Des Ferriols  -  The total debt burden of the National Government (NG) dropped further from over P4 trillion to only P3.869 trillion as the Bureau of Treasury (BTr) made adjustments to remove the assumed debt of the National Power Corp. (Napocor) that officials said were previously double-counted.

The adjusted total NG debt for March was still 11.7 percent more than the debt level recorded in March last year of P3.465 trillion and 1.5 percent more than the end-December level of P3.812 trillion.

National Treasurer Omar Cruz explained yesterday that the official NG debt data released since January included some P196 billion worth of NPC debt that had been absorbed by the NG, bringing the total to a little over P4 trillion.

According to Cruz, however, the Napocor debt that have been loaded into the total NG debt burden should not have counted as incremental debt since these were already reflected in the NG debt figures from the start.

"Simply put, the NG incurred the foreign debt and re-lent the proceeds to Napocor since it could not go directly to the market to raise funds for itself," Cruz explained.

The Napocor then issued bonds to the NG in exchange for the borrowing and the bonds were booked as assets of the NG. The Napocor continued to service these borrowings and the NG in turn serviced its foreign borrowing from the proceeds of Napocorís payments.

Since the Napocor was no longer able to service the debt, Cruz said the NG decided, in effect, to write them off by canceling the Napocor bonds from its books.

"In effect, we had to assume Napocorís debt and then cancel the bonds that are in our books as assets," he said. "So the net result is a wash transaction. That debt should never have been booked twice in the first place."

The correct figure for total NG debt in January 2004, Cruz said, was P3.810 trillion against the announced figure of P4.01 trillion. For February, the total NG debt was P3.885 trillion against the announced figure of P4.08 trillion.

Budget secretary Emilia Boncodin said the portion of NPCís debt that the NG absorbed were double-counted since the portion of the transaction that were booked only represented the assumption of the total of P196 billion.

"From a budgeting standpoint, my only concern is the impact of incremental interest payments on the budget," Boncodin said. "Since NPC will no longer be servicing these debts, the NG will then service them on its own."

Before the NPC debt was transferred to the NG, Boncodin said the NG only needed to spend part of the debt service cost since the NPC was paying the NG. Now, the whole cost would be shouldered by the NG to the extent of about P18 billion this year.

By 2006, however, Boncodin said the NG would have to start retiring some of NPCís maturing obligations.

The BTr, on the other hand, broke down the total NG debt into P2.059 trillion of domestic debt in March 2005 and P1.81 trillion of foreign debt.

Cruz said total domestic debt increased by 16.8 percent from last year but declined by 0.1 percent compared to the February 2005 level. On the other hand, NGís foreign debt increased by 6.3 percent compared to last year and declined by 0.7 percent compared to last month.

Cruz said there were indications that the NG debt has begun to plateau, reporting net redemption of about P1.5 billion so far this year.

Cruz told reporters yesterday that while there was no significant net decline in total NG debt stock, the national government has started to redeem more of its domestic debt than it was borrowing.

"Itís a start," Cruz said. "We plan to maintain this trajectory."

Reported by: Sol Jose Vanzi

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