The Department of Finance (DOF) said that expenditures for debt burden make up only around a tenth of the Marcos administration’s proposed national budget next year.
In a statement on Thursday, Aug. 25, Finance Secretary Benjamin E. Diokno said it was incorrect to cite debt burden as one-third of next fiscal year’s budget of the national government.
Diokno issued the statement to clarify an erroneous media report, claiming that nearly a third of President Marcos’ 2023 proposed budget submitted to Congress will be used to pay for government debts.
“Only 11.6 percent or P611 billion of the P5.268 trillion proposed 2023 National Budget is allocated for debt burden. The amount includes P582.3 billion for Interest Payments and P28.7 billion for Net Lending,” Diokno said.
The finance chief pointed out that it was also “erroneous” to include principal amortization of P1.02 trillion of the 2023 proposed budget as part of expenditures.
Diokno explained that principal amortization of debt is not included as an expense item under any accounting standard, whether in the private or public sector, being merely the settlement of debt obligations incurred from expenses already recorded in the past.
He added that the principal amortization does not contribute to additional debt because debt obligation is only transferred from an old creditor to a new creditor in the process of refinancing.
According to Diokno, the proper measure of the debt burden component of the budget includes only interest payments and net lending as reflected in the Department of Budget and Management’s (DBM) People’s Budget primer.
Diokno said that while the share of debt burden in the National Budget is 0.8 percentage points higher than this year’s 10.8 percent, it remains lower than 2021’s 12.4 percent.
Still, Diokno assured that the national debt remains within manageable levels.
He said that most of the national debt is long term, spread out, and set at the lowest possible rate.
As of end-June 2022, the national government debt stood at P12.79 trillion, equivalent to 62.1 percent of gross domestic product (GDP).
Under the Marcos administration’s Medium-Term Fiscal Framework (MTFF), the government aims to bring down the country’s debt-to-GDP ratio to less than 60 percent by 2025, and cut the deficit-to-GDP ratio from the current 6.5 percent to 3.0 percent by 2028.
Diokno said that the structural reforms and enhanced tax system instituted by the Duterte administration ensures that the government will be able to meet its obligations.
The MTFF also proposes measures that will further improve tax administration and enhance the fairness and efficiency of the tax system.
Diokno is confident that government revenues will continue to pick up and the deficit will decrease on the back of a strong economy, as demonstrated by a broad-based 7.4 percent gross domestic product (GDP) growth rate in the second quarter of 2022.
Among the targets set under the MTFF is an economic expansion of 6.5 to 7.5 percent in 2022. Economic analysts consider this goal to be the highest projected growth rate among the ASEAN+3 countries, which include Japan, South Korea, and China.
“The implication is clear: we do not have to borrow as much as we did during the crisis years,” said Diokno.