Stronger peso to mean savings for RP

More than P16 billion will be shaved off government debt payments next year if the peso will settle at 53 to the dollar, House appropriations committee chairman Rolando Andaya Jr said.

"If the peso’s strong climb will continue, then the President will be doing a lot more rocking or tripping the light fantastic, "Andaya said, referring to news reports of how President Arroyo , buoyed by the peso’s surge, took time out to enjoy a rock concert in suburban Manila Thursday.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. had said that the peso could appreciate to as high as 53 to the dollar next year if government’s reform efforts are sustained as planned.

"If the peso is headed toward the 53 to the dollar level, and stays there next year , some P16.3 billion will be deducted from our scheduled debt service," Andaya said.

This is so because the P721.7 billion debt service fund for 2006 was premised on a higher P57 to $1 exchange rate, Andaya explained.

Of the said amount, P232.6 billion was earmarked for foreign creditors – P113.5 billion in interest payments and P119.1 billion in principal amortization.

Given the current level of the public debt, a one-peso appreciation of the local currency against the dollar would translate to annual savings of about P4 billion in interest and principal payments of the government, Andaya said.

Outstanding public sector debt reached P5.5 trillion as of June , a heavy burden which compels government to currently allot 34 centavos of every budget peso to meet interest expense alone.

Andaya said a strong peso would free money earmarked for debt service to "productive expenditures such as social services."

"On a P54 to $1 exchange, we’re looking at almost P6 billion in savings in interest payments alone, "Andaya said. "We can use the savings to pay down our debt or we can earmark some of it to fix hospitals, hire more doctors, build roads , improve our schools, the kind of expenditure that will in turn lure investments, spur growth and create jobs."