The Department of Finance (DOF) clarified that only 12.1 percent, equivalent to PHP 699.2 billion, of the proposed PHP 5.768-trillion budget for Fiscal Year (FY) 2024, is allocated to financing the debt burden, including net lending.
“When assessing the debt burden component of the budget, it is crucial to solely consider interest payments and net lending,” Finance Secretary Benjamin E. Diokno said.
Interest payments (IP) have been declining, freeing up fiscal resources which can be reallocated to support the government’s priority programs.
Data shows that from 1986 to 2015, the average share of IP to the total National Government expenditures was at 23.3 percent. This further declined to an average of 10.1 percent from 2016 to 2022.
“For 2024, the allocation for interest payments is only 11.6 percent or PHP 670.5 billion of the 2024 budget. This allows us to spend more on socioeconomic programs and projects in our priority sectors such as education and infrastructure,” Finance Secretary Benjamin E. Diokno said.
The DOF also maintained that under any accounting standard, the principal amortization of debt is not included in the expense item since it is not classified as expenditure, hence it is not automatically appropriated.
“The settlement of debt obligations incurred from expenses were already recorded in the past. Therefore, principal amortization only represents the fulfillment of financial responsibilities arising from previously recorded expenses,” Secretary Diokno explained.
Since it is already an existing obligation, principal amortization does not result in any additional debt.
“If any, the responsibility for the debt is just moved from the previous lender to a new lender during the refinancing process. As a result, this does not add to the debt burden,” Secretary Diokno added.
He further added that since principal payments are merely settlements of liabilities incurred in the utilization of appropriations programmed in prior years, recording it again as expenditures would result in double counting of appropriations.
The economic team remains committed to implementing the Medium-Term Fiscal Framework (MTFF), which serves as the government’s blueprint to bringing down the country’s debt-to-GDP ratio from 60.9 percent in 2022 and to less than 60 percent by 2025, cutting the deficit-to-GDP ratio to 3.0 percent by 2028, and maintaining infrastructure spending at 5 to 6 percent of GDP.
As of March 2023, the National Government (NG)’s debt-to-GDP ratio was recorded at 61.0 percent, way below the 63.5 percent ratio in the first quarter of 2022.
Through the continuous implementation of improvements to tax administration and efficiency and implementation of key tax reforms, the government is confident that revenue collections will continue to increase and the deficit will narrow on the back of a strong economy.
“We would like to thank Congress for its continuous support on the MTFF legislations and for the ongoing work on the remaining revenue measures,” Secretary Diokno said.
