MANILA, Philippines - Total debt guaranteed by the national government or the so-called contingent liabilities fell by almost a tenth in the first eight months of the year, data from the Bureau of The Treasury showed.
Contingent liabilities amounted to P412.9 billion from January to August. The amount was 2.5 percent higher than the figure recorded in the first seven months.
Guaranteed debts have declined by 28.3 percent since President Aquino assumed office in July 2010.
Contingent liabilities are debts guaranteed by the government. This means if a state agency fails to pay for it debts on time, the National Government will take care of what is due. A particular segment of the budget is allotted for this purpose.
These obligations are often owed by the state to private contractors that undertake specific projects for the government. It could also work as an assurance for payments for loans taken by government-owned and –controlled corporations or financial institutions.
Finance Undersecretary Gil Beltran underscored the need for the government to keep an eye on contingent debts.
“Otherwise, the NG may end up paying the debt, causing an impact on our balance sheets,” Beltran said in a text message yesterday.
As of August, foreign liabilities accounted for bulk of contingent debt at P307.21 billion while domestic debt stood at P105.7 billion.
Foreign debt rose 3.5 percent while peso-denominated debt dipped 0.2 percent year-on-year.
Direct guarantees—or those given directly by NG to private contractors—reached P408.775 billion, while those assumed from GFIs amounted to P4.13 billion.
During a budget hearing last week, Bayan Muna Rep. Neri Colmenares hit the Department of Finance for allotting billions in pesos for the payment of contingent debts yet it failed to consider cutting income taxes for the public.
Twin proposals in the House of Representatives and the Senate are batting for lower income taxes from as high as 32 percent to about 25 percent. These measures, if approved, would result in P30 billion in annual revenue losses, the government said.
“Why are we ready to pay billions in pesos to meet our contractual obligations yet we are not ready to lose P30 billion for the benefit of our poor people,” Colmenares said.
In response, Cebu Rep. Gabriel Luis Quisumbing, who represented the Finance department in the hearing, said the government is committed to service its financial obligations.
“Besides, these are unprogrammed funds under the budget, meaning they will only be spent if the need arises. Otherwise, this will be used for other purpose,” Quisumbing noted.