Government to raise expenditures for infrastructure, services next year

The government will be raising expenditures for infrastructure and services while spending less for debt servicing next year.

Department of Budget and Management (DBM) Secretary Rolando Andaya Jr. said in a statement that government in 2007 will be prioritizing so-called pro-growth programs.

"We will free P22 billion from debt service and use this for productive purposes instead of being remitted to our creditors, these funds will now go to farms, roads and schools," said Andaya.

He said budget allocation for social services will increase to P335.4 billion in 2007 from P256.8 billion this year.

Andaya noted in a recent Congressional hearing that robust tax collection, spending for economic and social services will swell while interest payments are expected to shrink. The DBM presented a draft proposal for the P1.137-trillion budget for next year.

The DBM said the share of debt service to the national budget will decline to 28.8 percent from this year’s 36.2 percent. In the first semester, interest payments will go down from this year’s level of P340 billion to P318 billion in 2007.

Andaya said the 2007 budget is based on macro-economic assumptions of 5.7 percent gross domestic growth, inflation of 4.3-4.8 percent and an exchange rate of 51-53 to $1.

In another development, the government will adjust the fiscal program for 2009 and 2010 to reflect the increased allotment of funds for pump priming instead of debt reduction.

The inter-agency Development Budget Coordination Committee (DBCC) is reviewing targets, but will keep fiscal levels up to 2008 only – the year finance and budget officials are expecting a balanced budget.

DBCC sources said that for 2009 and 2010 there is a projected budget surplus of P12.1 billion and P17 billion. This is after debt level is reduced to zero by 2008.