RECTO: PINOYS PAYING P2 BILLION A DAY FOR RP'S DEBTS
MANILA, FEBRUARY 13, 2010 (STAR) By Jess Diaz - Filipinos are now paying P2 billion a day for the country’s huge indebtedness, former Sen. Ralph Recto said yesterday.
He said for 2010, taxpayers would shell out P340.8 billion in interest payments alone on the national debt, while an additional P405.4 billion is programmed for loan principal amortizations.
“The total amount allocated for debt payments is P746.2 billion. That’s P2.044 billion a day,” he said.
“The P1.541-trillion national budget President Arroyo signed last Monday attaches the highest priority to debt service and not education as claimed by the Palace,” he added.
Recto pointed out that only P175 billion is earmarked for the Department of Education, while P23.8 billion is allocated for state colleges and universities.
He said this year’s debt payments would eat up almost all of the projected collections of P875 billion of the Bureau of Internal Revenue.
Debt watchdogs have estimated the country’s debt at P4.4 trillion. The nation’s debt doubled in the nine years of the Arroyo administration, which has posted unprecedented levels of budget deficits or shortfalls.
Financing shortfalls are filled through local and foreign borrowings. In 2009 alone, the budget shortfall was nearly P300 billion.
In approving their version of the 2010 budget, senators and congressmen had cut the P340.8 billion Mrs. Arroyo proposed as interest payments by P65 billion, diverting the huge reduction to their pork barrel.
Of the diverted funds, lawmakers gave away P30.3 billion in additional funds to the Department of Public Works and Highways, the agency where most pork barrel funds are hidden.
The President, in signing the budget on Monday, restored the reduction, keeping interest payments at the level she had recommended.
However, she kept all the projects, together with their appropriations, that lawmakers had intended to finance out of the diverted debt payments. In effect, Mrs. Arroyo retained the P65 billion in additional pork barrel funds.
But she made it clear that money for these projects would be released only if the incoming 15th Congress imposes new taxes or increase existing tax rates to raise funds for them.
Recto said with the President’s decision to restore the P65-billion interest payment cut, she should have also scrapped all the projects and appropriations supposed to be supported by such reduction.
“Congressional earmarks (euphemism for insertions) should have been deleted since their fund source, which was the reduction in debt payments, has been removed by the President,” he said.
“In budgeting, when cuts are restored, then the items to which the funds have been transferred ceased to exist, because not canceling them would create unsupportable expenditures. It will also effectively raise the budget ceiling,” he said.
Recto, who was Mrs. Arroyo’s economic planning secretary, projected that if the congressional insertions in the 2010 budget were funded through borrowings, the budget deficit could reach a record level of P400 billion.
Former budget secretary Benjamin Diokno estimated the deficit to hit P500 billion.
Recto has proposed that for the nation to wipe out its budget deficit, the government should resort to “zero budgeting,” meaning it should start from scratch in formulating its annual spending program.
It should do away with or substantially cut “non-essential” expenses, like those for travel, training and seminars, representation, donations, repair and maintenance, and professional services, he said.
In the 2010 budget, P8.5 billion is allocated for travel, P3.5 billion for communication, P24.7 billion for repair and maintenance, P43.4 billion for supplies and materials, P19.2 billion for professional services, P1.4 billion for confidential expenses, and P702.9 million for miscellaneous expenses.
Some P818.4 million is budgeted for advertising and P1.4 billion for “survey expenses.”
RELATED STORY FROM THE INQUIRER'S POLITICAL/HEADLINE NEWS
Recto, Binay say Arroyo signed bloated budget Philippine Daily Inquirer First Posted 05:31:00 02/11/2010
Filed Under: State Budget & Taxes
MANILA, Philippines—Opposition senatorial candidate Ralph Recto has claimed that the 2010 budget that President Gloria Macapagal-Arroyo signed the other day amounted to P1.723 trillion, or P185 billion more than the P1.54 trillion approved by Congress.
Recto, Ms Arroyo’s former economic planning secretary who is now with the opposition Liberal Party, said the P185 billion came from the P64.6 billion in pork barrel insertions made by the senators and congressmen which he claimed the President failed to veto, and the P119 billion in unprogrammed funds supposedly tucked into the 2010 budget.
The senators and congressmen had slashed P65 billion in automatic debt service payments from the 2010 budget and redirected the amount to their pork barrel allocations.
Malacañang announced the other day that the President had signed the P1.54-trillion budget and restored the P65 billion in debt service payments, in effect vetoing the pork barrel insertions.
But Recto claimed that Ms Arroyo did not veto the congressional insertions which, added to the restored debt service payments, he said would bloat the budget and encumber the country’s next President with a cash-strapped and debt-ridden treasury.
Makati Mayor Jejomar Binay, the vice presidential candidate of the Pwersa ng Masang Pilipino (PMP), sounded the same tune as Recto, claiming that Ms Arroyo had not vetoed the pork barrel insertions.
He said that while Ms Arroyo did not accede to the realignment of P65 billion in debt payments to the pork barrel of the senators and congressmen, she said Congress could pass new revenue measures to finance the insertions.
“In effect, she is tempting Congress to inflict new taxes on the people,” Binay said. Gil C. Cabacungan Jr. and Miko Morelos
MALAYA BUSINESS INSIGHT HEADLINE NEWS
Analyst sees better loan growth this year on ‘surprising’ December figures
With the surprising double-digit growth in bank lending for the month of December, better prospects for 2010 are expected.
Luz Lorenzo, group economist of ATR KimEng, said that they are seeing loan growth this year ranging from as low as 5 percent to as high as 12.5 percent, "putting the average at 8.7 percent."
"That banks ended the year with a larger-than-expected loan book bodes well for our projections, which are based on more conservative forecasts," Lorenzo said.
The Bangko Sentral ng Pilipinas (BSP) on Wednesday said that bank lending, net of banks’ reverse repurchase (RRP) placements, grew at a faster pace of 10.0 percent in December compared to the previous month’s expansion of 6.6 percent.
Total loans outstanding in December reached P2.146 trillion.
Outstanding loans of commercial banks, including RRPs, also increased more steeply by 9.1 percent from 2.6 percent in November, to reach P2.4 trillion.
"In absolute terms, this translates to an P87 billion increase, the biggest monthly gain we have on record," Lorenzo said.
She said that while part of this is probably on account of yearend window dressing, "we suspect that much of it is actually driven by a real economic recovery, judging by the export recovery and sustained gains in remittances from overseas Filipinos."
Citi says RP heading for a ‘gentle’ exit BY JIMMY CALAPATI
Given renewed inflation risks and the likelihood of liquidity shock from first quarter election spending, international bank Citi sees the Philippines heading for an exit this year from its tightening policies implemented late 2008 to combat the global financial crisis.
"Earlier this month, Asia’s version of the exit program began with China leading the way. The Philippine version is likely to follow soon," Jun Trinidad of Citigroup Global Markets said.
Trinidad said said they expect the Philippine’s exit to be "gentler" in view of the lackluster recovery, likely led by liquidity-draining measures in March 2010 with policy rate hikes set to be last in the sequence.
"We may see a 50 basis point rate hike after the May elections to help drain liquidity and cap oil price pass-through effects. The overnight rate may end 2010 at 5 percent although this will likely lag inflation risk," Trinidad said.
He added that remittances should drive consumption prospects, although additional spending catalysts this year could stem from election spending in the first quarter, fiscal relief and rehab expenditure in the first half, export gains and inventory replenishment.
Citi expects GDP growth of 3.7 percent this year.
Trinidad said the Bangko Sentral ng Pilipinas could initiate its exit strategy with a bank reserve hike late in the first quarter on excessive liquidity concerns.
At the start of 2010, Trinidad said there has been heightened market focus on possible withdrawal of liquidity support and potential policy rate hikes after core inflation unexpectedly rose to 3.2 percent in December.
"Within the region, China led the move to head for the ‘exit’. While not every economy in the region is bursting at the seams with growth like China, the Philippines faces excess liquidity risk coincident with a clear inflation uptrend," Trinidad said.
He said that extrapolating the prevailing monthly CPI trend may see inflation overshooting 5 percent in the first quarter, moving to a 6 percent clip in the third quarter.
"We expect election spending to peak in the first quarter, which may exacerbate money supply growth. Broad money growth of 12 percent in November may be elevated but sans election spending as a ‘multiplier’, narrow money growth eased to 16 percent from 17.5 percent in Oct," Trinidad said.
On Wednesday, BSP said domestic liquidity or M3 reached P4 trillion in December, reflecting a slower growth of 8.3 percent year-on-year from the previous month’s 12 percent.
This brought the average M3 expansion to 13.2 percent for 2009.
Trinidad added that the one-off liquidity impact of election spending and a likely weaker recovery will probably spur the monetary authority to undertake a "gentler" exit program from March with liquidity draining measures like initial bank reserve hike of 1 percent that could drain the system of P30-P35 billion.
"Overnight rate adjustments perhaps after the May elections would follow last at a time when the trajectory of headline inflation would justify rate hikes," Trinidad said.
Trinidad maintained that an expected cumulative overnight rate hike of 100 basis points to 5 percent within the year would only catch up with expected average inflation of 5.7 percent this year.
"Pass-through from higher food prices and oil prices amid recovery prospects would speed up inflation. Barely positive real rates would not discourage private spending," Trinidad said.
Signifying an exit strategy is already planned, the policymaking Monetary Board on January 28 kept the key policy rates of the BSP but decided to set the peso rediscount rate equal to the overnight RRP rate, or at 4 percent.
It will be recalled that the Board approved March last year, a peso rediscount rate that was 50 basis points lower than the overnight RRP rate.
This was part of a package to liberalize banks’ access to the BSP’s rediscounting facility and ensure the orderly operation of domestic financial markets should global financial conditions worsen.
Chief News Editor: Sol Jose Vanzi
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