Budget Secretary Emilia Boncodin said yesterday that based on early indications, there would be a significant increase in interest payments because of rising interest rates.
Since the budget allocation for debt service will end up eating more than expected for 2004, Boncodin said there was a need to implement even more cuts in government spending for the rest of the year.
"We already have a bare-bone budget but we will have to make it even more bare," Boncodin said. "Clearly there is a need to increase revenues to make up for the increase in debt service costs but we will also have to cut spending."
Finance Secretary Juanita Amatong, on the other hand, said the Department of Finance (DOF) would have to undertake bolder revenue measures to beef up government resources.
"Clearly, there also has to be a firm executive push for the legislature to undertake bolder measures that would increase revenue flows in a sustainable manner," Amatong said.
Amatong and Boncodin, however, adamantly ruled out any possibility of adjusting the Arroyo administration’s deficit target this year or even over the medium term.
"Under no circumstances will there be a move to touch the deficit target," Boncodin said. "This means that no government agency will be spared from these painful measures. We all have to go through it."
Amatong added that since the budget program will not be touched, the adjustments would have to happen elsewhere.
"We have to recalibrate because we didn‚t factor in the extent of oil price increases and the possible increase in US interest rates."
According to Boncodin, the DBCC’s technical working group (TWG) was already crunching the numbers depending on various models based on different assumptions.
Boncodin did not single out which sectors would bear the brunt of the spending cuts but said there were specific areas that would be protected as much as possible.
"Definitely, we cant make any cuts anymore in social services, education and rural water distribution," Boncodin said. "These areas were part of the administration‚s campaign promise so I don’t think we will be making any cuts there this year."