Share of debt servicing to total expenses seen to keep shrinking | Inquirer Business

Share of debt servicing to total expenses seen to keep shrinking

/ 10:02 PM January 05, 2014

Debt servicing, which used to eat a third of the national budget about a decade ago, is seen to continue shrinking as a percentage of state expenditure to hit only 12 percent by the end of the Aquino administration’s term.

Finance Secretary Cesar Purisima said the government was committed to sustain the decline in the share of debt servicing in the national budget to further increase the fiscal space for vital expenditures, such as infrastructure and social services.

Only interest payments are included in the national budget. Principal debts are paid using proceeds of loans secured by the government.

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The finance chief noted that interest payments accounted for about 22 percent of the national budget in 2010, the first year of the Aquino administration.

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In 2013, the share of interest payments to the national budget was estimated to have dropped to 16.6 percent. Out of the P2.006-trillion budget for last year, nearly P334 billion was used to pay interest on government debt.

For this year, the share of interest payments to the national budget is programmed to drop further to 15.6 percent. Out of the P2.265-trillion national budget, P352.65 billion was earmarked for interest payments.

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In absolute amount, however, interest payments have continued to rise. This is because the government’s budget deficit has continued to rise, forcing the government to resort to more borrowings.

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But the increase in the amount of interest payments is slower than the increase in the national budget, resulting in the declining share of debt servicing in the state’s annual expenditure.

In 2014, for instance, interest payments grew by nearly 6 percent from year-ago level, but the national budget went up by about 13 percent in the same period. Michelle V. Remo

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TAGS: Aquino administration, Business, debt servicing, economy, News

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