Drowning in debt?

The national government’s total outstanding debt stood at P14.15 trillion as of end-June 2023, according to the Bureau of Treasury. The government’s debt portfolio increased by P51.31 billion compared to the previous month. Of the total debt stock, 31.5 percent was sourced externally while 68.5 percent were domestic borrowings. Domestic debt amounted to P9.38 trillion.

Talking in the trillions of pesos means little to most Filipinos who most likely don’t even know how many zeroes are in a trillion. Kaya lang, dahil bumabaha ang utang, we will be drowning in more zeroes as our government borrows and spends as it pleases.

Our government’s economic managers assure us that we shouldn’t worry because even borrowings in the trillions are alright so long as we can grow our economy, as measured by the GDP. But last week, the GDP growth rate of 4.3 percent was below expectations.

Finance Secretary Ben Diokno has been trying to talk up the year’s GDP growth rate to as high as seven percent. That isn’t likely after last quarter’s 4.3 percent growth amid international economic headwinds and food supply adversely affected by weather, food protectionism, and Russia’s Ukraine war.

Headline of a Bloomberg story this weekend: One of Asia’s bright spots dims as Philippine growth falters.

Our debt level’s health is measured by the debt to GDP ratio. That affects how credit rating agencies and international creditors view our economy’s prospects. The ideal is at no more than 60 percent. Ours is now at 63 percent and the President is rightfully getting worried and he is not buying Diokno’s self-serving optimism.

“We worry about our debt-to-GDP ratio in the Philippines as it stands at about 63 percent and that’s a little high for us and it is not ideal,” the President said.

But most members of Congress cannot be bothered by what, to them, is an esoteric economic measure. All they care about is how much pork they can put into the appropriations law because that determines how much money they can make on government projects.

Deputy Speaker Ralph Recto is probably the exception because he is trying very hard to make the public understand what those trillions mean.

“To fully appreciate the enormity of both spending and borrowings, you have to compute the budget on a daily basis,” Recto said. So, he explains that the proposed 2024 national budget of P5.767 trillion translates to an average daily spending of P15.8 billion, but only P11.7 billion of which is supported by revenues, leaving a P4 billion hole that must be plugged by debt.

“In easy to remember figures, this is the lowdown: Gagasta ng P15.8 billion bawat araw. Ngunit P11 billion lang ang kayang pondohan ng buwis. Kaya may P4 bilyon na dapat utangin. Kada 24 oras,” he said.

Recto said that the government downplays the enormous money required to finance the national budget. If the government were a household, it is living beyond its means, umuutang sa 5/6 dahil sa matinding pangangailangan.

“Programs that dazzle are highlighted while muting the cost, a great portion of which are paid by debts left for the next generation to pay. Payment for interest alone on the burgeoning public debt will be around P1.8 billion a day next year,” Recto said.

Worse, Recto said, the budget bill presented to Congress does not give the whole picture. “Pambayad lang sa interest ang nasa national budget. ‘Yung bayad sa principal, ‘yung amortization, na automatically appropriated, hindi kasama sa national budget,” Recto said.

However, if the principal amortization requirement of P3.4 billion a day is added to the interest payment of P1.83 billion, “real” debt service expenditures would be around P5.2 billion daily. “’Yan lang ang bayad sa utang, hiwalay ang uutangin,” Recto explained, referring to the scheduled interest payments of P670 billion and P1.24 trillion in principal amortization in 2024.

“Gross borrowings next year – to finance the deficit, debt, and development –has been forecasted to reach P2.46 trillion or “about P6.7 billion daily,” Recto said. Almost P1.7 trillion annually pays for “Personal Services”, which is an expense class term for the salary and other compensation of national government employees and pension of uniformed personnel “would come up to P4.6 billion a day.”

“Ganyan kalaki ang ating payroll at ibang kaakibat na gastos. Kung kada limang oras, mga isang bilyon. Kasi naman marami tayong kawani - sa DepEd na lang ay isang milyon na,” Recto said.

But while the government will be spending P15.8 billion a day, the  BIR and the Bureau of Customs are projected to only collect P8.3 billion and P2.7 billion daily, respectively, or a combined P11 billion a day.

“In fact, ‘yung tinatayang arawan na koleksyon sa sales tax on goods na P1.7 billion, kulang pa sa P2.53 billion daily expenditures natin para sa sektor ng edukasyon,” Recto said. Because not all that will be appropriated will be disbursed, the deficit to be financed will be about P3.7 billion daily, Recto said.

All these trillions and billions would have been alright if we can see what all that money is buying in terms of infrastructure and services. But we know a large part of what we borrow ends up in the pockets of corrupt politicians and their cronies. Over a billion pesos are now being allocated for confidential funds, which do not require auditing. It is easy to assume most of the funds will be lost as well.

The Ombudsman estimated that 20 percent of the national budget goes to corruption. That means P1.1 trillion out of our P5.3 trillion budget this year will be stolen. A trillion pesos lost to corruption is more money than is needed to build a new international airport. The one San Miguel is building in Bulacan costs P740 billion.

When the national debt was at the level of P12 trillion, it was estimated that each Filipino will have a debt of over P100,000, including babies just being born.

We are told that we have to borrow to grow the economy. But from experience we know the only thing that grows from our government’s borrowings are bank accounts of crooks in public office and their allies.

Kawawa our future generations who must pay for all these.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco