Government backs planned cut in 2009 budget for interest payments

The government is not opposing the planned reduction of next year’s budget for interest payments, with officials saying that interest rates are likely to soften in 2009.

The Senate wants to realign roughly P2 billion of the proposed P1.415-trillion budget. Senators want the budget to be realigned to finance other expenses such as social services.

The move, lawmakers said, is meant to help the country cope with the adverse effects of the global financial turmoil.

As such, senators slashed the P303-billion budget for interest payments next year by P2 billion to finance social services and other mitigating measures.

The government is not opposing the reduction as interest payments are likely to soften next year, National treasurer Roberto Tan said.

Socioeconomic Planning Secretary Ralph Recto agreed that there was a need to spend more for social services and infrastructure projects.

For 2009, the Philippines expects its debt service requirement to go up by 7.1 percent to P681.5 billion from the programmed amount of P636.07 billion for this year.

Of the amount, interest payments are expected to increase by 4.33 percent to P302.67 billion in 2009 from the programmed P290.1 billion this year.

Similarly, payments for principal obligations are projected to climb by 9.5 percent to P378.86 billion from the programmed P345.97 billion this year.

As of end-August, the government’s total debt stock breached the P4-trillion level due to the issuance of more Treasury bills and bonds.

Latest data from the Bureau of the Treasury showed that the debt stock of the National Government rose by 1.5 percent to P4.024 trillion in August from P3.966 trillion in July.

The government expects to incur a budget deficit of P75 billion this year and P102 billion in 2009 as it needs to spend more for social services and infrastructure projects to help the economy stay afloat amid a global financial crisis.