Benjamin Diokno: Only P611B, not a third, for debt in 2023 budget

Benjamin Diokno. FILE PHOTO

MANILA, Philippines—Finance Secretary Benjamin Diokno on Thursday (Aug. 25) said payments for interest and net lending—totaling P611 billion—had been set aside for debt payment expenditures in the national budget proposal for next year, despite bigger total repayments.

“Only 11.6 percent or P611 billion of the proposed P5.268-trillion 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 in a statement.

“This is much lower than the P1.6-trillion debt service” reported by the Inquirer, Diokno said.

President Ferdinand Marcos Jr’s separate budget message said next year’s total debt payments amounted to P625.5 billion, or 11.9 percent of the proposed appropriations for next year.

Budget documents had shown that the government will repay a record P1.6 trillion in debts next year — the highest yearly debt servicing on record — due to the massive borrowings that piled up amid the prolonged COVID-19 pandemic.

Next year’s debt servicing will be higher than the P1.26 trillion programmed to pay outstanding obligations this year.

In 2023, the government will repay P1.35 trillion in domestic debts (up from P1.02 trillion this year), plus P253.8 billion in foreign obligations (up from this year’s P240.1 billion).

Debt payments next year will be composed of a record P1.02 trillion in principal amortization (up from P751.1 billion this year), on top of P582.3 billion in interest payments (up from this year’s P512.6 billion).

But Diokno noted 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.”

“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,” Diokno explained.

“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,” added Diokno, who was a former DBM chief.

“While the share of debt burden in the national budget is 0.8-percentage point higher than this year’s 10.8 percent, it remains lower than 2021’s 12.4 percent,” Diokno said.

TSB