‘Debt burden only a tenth,not a third, of 2023 budget’

THE Department of Finance has clarified that debt burden makes up only around a tenth, not one third, of the proposed 2023 national budget.

Finance Secretary Benjamin E. Diokno said only 11.6 percent or P611 billion of the proposed P5.268-trillion national budget for next year is allocated for debt burden.

This comprises P582.3 billion for interest payments and P28.7 billion for net lending.

Diokno issued the clarification after a media outfit reported that the debt burden made up one-third of the proposed budget next year.

“This is much lower than the P1.6-trillion debt service—equivalent to 29.8 percent of the proposed budget—cited in the article, which erroneously included the principal amortization of P1.020 trillion as part of expenditures,” Diokno said.

The finance chief explained that principal amortization of debt is not included as an expense item under any accounting standard, whether in the private or public sector because this is “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.

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.

While the share of debt burden in the national budget is 0.8 percentage points higher than this year’s 10.8 percent, Diokno pointed out that this remains lower than 2021’s 12.4 percent.

Former President Duterte ended his term with the national government’s debt stock soaring to another record high of P12.79 trillion as of end-June this year, as the country needed to borrow more to fund its fight against Covid-19 pandemic.

Next year’s gross borrowings of the national government are seen to hit P2.207 trillion, of which 75 percent or P1.65 trillion will come from local sources while the remaining P553.5 billion will be generated from foreign lenders.

Under the Marcos administration’s Medium-Term Fiscal Framework (MTFF), the government aims to bring down the country’s debt-to-GDP ratio from this year’s estimate of 61.8 percent to 51.1 percent by 2028 and cut the deficit-to-GDP ratio from the current 6.5 percent to 3 percent by 2028.

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