Ex-NEDA chief urges gov’t to seek relief from int’l creditors

The Philippines must move towards debt relief if it wants to seriously implement its medium and long term development plans.

However, this can only be achieved if the national leadership has credibility both domestically, and especially internationally.

Ateneo de Manila University professor and former NEDA Director General Cielito F. Habito said the country must be able to negotiate some kind of debt relief such as debt restructuring.

Habito said government is in fact initiating discussions with foreign creditors, especially after the G8 nations agreed to some kind of debt relief for a number of least developed countries.

"They are not admitting it but the National Government knows it cannot continue debt servicing at the present rate."

The National Government is preparing a P1-trillion national budget for 2006. Budget Secretary Romulo L. Neri said roughly 70 percent of the proposed budget would go to debt servicing.

This year, debt servicing accounts projected revenues.

The country is projected to pay P345 billion in principal and another P301 billion in interests, roughly P645 billion, this year against projected tax revenues of P730 billion.

"That is, nine pesos out of every P10 in revenues collected by the government will go to debt service, leaving only P1 for current government expenses," said Habito who was socio-economic planning secretary during the presidency of Fidel V. Ramos.

The country’s six-year Medium Term Philippine Development Program (MTPDP) is focused on increased expenditures to spur growth and wider economic activity especially aggressive infrastructure spending.

Habito wonders where the National Government will get the revenues if the proposed expanded value-added tax (EVAT) remains chained by a temporary restraining order (TRO) and over-all tax revenue collections fail to meet targets.

Last Monday, the Bureau of Internal Revenue (BIR) admitted its July collection was off by P9 billion or 20 percent below targets. For the first seven months this year, the shortfall is estimated at five percent.

It was also estimated that the National government must negotiate another P870 billion in new debts to be able to meet its expenditure requirements, fund its national appropriations and address debt servicing. for 88 percent of projected revenues.

The country is projected to pay P345 billion in principal and another P301 billion in interests, roughly P645 billion, this year against projected tax revenues of P730 billion.

"That is, P9 out of every P10 in revenues collected by the government will go to debt service, leaving only P1 for current government expenses," said Habito who was socio-economic planning secretary during the presidency of Fidel V. Ramos.

The country’s six-year Medium Term Philippine Development Program (MTPDP) is focused on increased expenditures to spur growth and wider economic activity especially aggressive infrastructure spending.

Habito wonders where the National Government will get the revenues if the proposed expanded value-added tax (EVAT) remains chained by a temporary restraining order (TRO) and over-all tax revenue collections fail to meet targets.

Last Monday, the Bureau of Internal Revenue (BIR) admitted its July collection was off by P9 billion or 20 percent below target. For the first seven months this year, the shortfall is estimated at five percent.

It was also estimated that the National government must negotiate another P870 billion in new debts to be able to meet its expenditure requirements, fund its national appropriations and address debt servicing.