Gov't debt servicing expenses down by 19% in Jan.
By Michelle Remo
Philippine Daily Inquirer
First Posted 19:19:00 03/27/2008
MANILA, Philippines--Government spending for debt servicing fell 19 percent to P41.78 billion in January from year-ago level, as the peso appreciation against the dollar helped trim the country's foreign currency-denominated obligations.
Data from the Department of Finance showed that of the debts settled last January, the bulk of P30.05 billion represented interest on loans. Principal liabilities accounted for the balance of P11.736 billion
Of the total, P24.65 billion worth of the debts paid were domestic obligations and denominated in pesos. The remaining P17.13 billion came from foreign lenders and denominated in foreign currencies, mostly in dollars.
The government uses its tax collection and non-tax revenues to pay its debts. But because tax and privatization revenues were not enough to cover all of the government's maturing debts and expenditure requirements, it resorts to borrowing.
Finance officials said, however, that the government's dependence on borrowings had been on a decline because of increasing revenue collection. It is expected to further rely less on borrowings once it achieves the goal of a balanced budget.
While the strong peso resulted in the dwindling of the income of exporters and overseas Filipino workers, officials said the strong currency was beneficial to the government in terms of its fiscal position. The peso strengthening brings down the peso value of its foreign currency-denominated debts.
Year-on-year, the peso appreciated by 17 percent in end-January. It closed at 40.65 against the dollar compared to 49.027 in the same period last year.
This encouraged the government to prepay some of its foreign obligations.
Finance Undersecretary and Acting National Treasurer Roberto Tan earlier said the government would continue to take advantage of the opportunities that would help the government better manage its debts.
He said the government would continue prepaying debts that were allowed to be settled before maturity. Not all debts may be paid in advance, he said, as some were bound by contracts citing payment schedules.
The government's declining budget deficit also allowed it to borrow less last year, helping reduce the amount of debt servicing in the subsequent years.
The deficit settled at only P12.4 billion last year, much lower than the P64.8 billion recorded in 2006. This year, the government expects to further improve its fiscal condition by achieving a balanced budget.
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