MANILA, Philippines - Interest payments for debt service in the budget program for next year may have been overstated by as much as P7.7 billion, according to Senate ways and means committee chairman Ralph Recto.
With the budget department’s shielding of debt servicing from congressional review, the excess interest payment cannot be rechanneled to social services.
Recto said the government has set aside P357 billion of the P1.645-trillion national budget for interest payments alone. Of the amount, P120.8 billion has been earmarked for interest payment for foreign obligations.
He said the P120.8 billion is premised on a P47:$1 exchange rate, which is “a high assumption, in the light of emerging consensus among banks that the peso could strengthen to at least P43 to a dollar next year.”
Recto said Standard Chartered Bank has forecast the peso to reach P43 against the US dollar by the end of 2011 while HSBC and Goldman Sachs are more bullish, predicting the peso to surge to P42.50 and P42, respectively.
Recto said using the P45 to a dollar reference rate would reduce interest payment allocation from P120.8 billion to P115.7 billion or a difference of P5 billion, while a P44:$1 benchmark would further whittle interest payment to P113.2 billions, which would free up P7.7 billion for “productive expenditures.”
Recto said the savings may be used for improving public hospitals “or can be added to the P15 billion seed fund for Public-Private Partnership in infrastructure.”
He said the funds should be used for vital projects “especially infrastructure whose 2011 level of P147 billion is P17.5 billion lower than this year’s P164 billion program.”
In a statement, Recto surmised that interest payments for next year have been “deliberately bloated to create a buffer in the event tax collection falls.”
‘Cloak of infallibility’
He said automatic appropriations are beyond Congress scrutiny because they “are presumed to be 100-percent correct and thus cannot be changed.
“Automatic appropriations are now clothed with the cloak of infallibility. The new dictum it seems is that automatic appropriations are automatically correct that they are beyond scrutiny and possible correction by Congress,” Recto said.
The Aquino administration has submitted P933.5-billion worth of expenditures for 2011 as against the ceiling of P1.64 trillion.
The Palace has argued that it does not need congressional authorization to spend the balance of P711 billion in automatic appropriations items.
Aside from debt service, other expenditures deemed automatically appropriated are the Internal Revenue Allotment of P287 billion, and retirement and life insurance premiums (RLIP) of government employees (P22.4 billion).
Recto said he could not accept “a presumption of correctness of the P22.4 billion in the proposed RLIP considering that there is no reliable database on the names and number of government employees.”
Recto said the decision not to submit debt service for congressional approval was spurred by worries that lawmakers would reduce the amount and convert the “savings” into pork, Recto said.
“If the worry of the executive branch is that interest payments will be carved up into small pork slabs, then my suggestion is that not a single centavo of funds transferred from interest payments will end up in legislators’ allocations,” he said.
Recto said the executive should have “the sole monopoly in doing the realignment.”
Recto said the changes can be effected by a simple message of the President to Congress “stating that the amount for next year’s interest payment as indicated in the proposed budget has been reduced by, say, P7 billion, and this, in turn, has been added to the sector of his choice.”