Palace official hits debt cap proposal

A Malacañang official criticized yesterday a proposal of Senate President Franklin Drilon to put a cap on the country’s debts to avoid a looming fiscal crisis.

Speaking over state-run Radyo ng Bayan, Deputy Presidential Spokesman Ricardo Saludo said even without a debt cap, the administration has set a limit on the country’s foreign and local loans, contrary to the claims of the opposition. "Of course, we know what (is) our capacity to pay these debts, and we have our rules," he said.

However, Saludo said it is within the powers of Congress to put a restriction on the country’s borrowings if the lawmakers deem it so. On the other hand, Saludo said debts are not the sole reason for the country’s debts as there is still the budget deficit.

"The problem is deficit," he said. "Why are we borrowing in the first place? We borrow for us to fill in our deficit. So if we are able to reduce the deficit, it’s but natural that our borrowings would go down... But in general, what we really need is to raise, especially, the collection of taxes."

He said Mrs. Arroyo has ordered government-owned and -controlled corporations to stop incurring loans, which the government would later guarantee.

Tax bills, particularly those on cigarette and liquor have been "languishing" in Congress for sometime now, he added.

Meanwhile, Albay Rep. Edcel Lagman said a debt cap must be double edged: It must limit borrowings or contracting of new loans and reduce debt service. "If we put a cap on borrowings only, debt service will still be huge because of the accumulated amortization and interest payments on past loans," he said.

"Even if we do not borrow for the next five years, which is improbable, our debts service will remain enormous as a result of previous years’ binge on borrowings." — Marichu Villanueva, Paolo Romero