Diokno: The public debt burden represents only 11% of the budget in 2023

Finance Secretary Benjamin Diokno said on Thursday that debt burden allowances would be only a tenth of the proposed national budget for 2023, not a third of the total.

“Only 11.6% or 611.0 billion pesos out of the 5,268,000 billion pesos proposed in the national budget for 2023 is allocated to the debt burden. The amount includes 582.3 billion pesos for interest payments and 28.7 billion pesos for net loans,” Diokno said in a statement.

“This is well below the debt service of 1.6 trillion pesos, or 29.8% of the proposed budget,” Diokno said to correct reports that included principal amortization of 1.020 trillion pesos as part spending.

Diokno said amortization of debt principal is not included as an expense item in any accounting standard, whether in the private or public sector.

He said the principal amortization would not contribute to additional debt. The debt obligation is only transferred from an old creditor to a new creditor in the process of refinancing, he said.

Diokno said the appropriate measure of the debt burden component of the budget includes interest payments and net lending, as outlined in the Department of Budget and Management’s People’s Budget introduction.

He said that while the debt burden share in the 2023 national budget would be 0.8 percentage points higher than this year’s 10.8 percent, it would still be lower than 2021’s 12.4 percent.

Diokno previously assured senators that the national debt remained at manageable levels. He said most of the national debt is long-term, spread out and pegged at the lowest possible rate.

Data showed that at the end of June, the national public debt reached 12.79 trillion pesos, or 62.1 percent of GDP.

The government, under the medium-term fiscal framework, aims to reduce the debt-to-GDP ratio to less than 60% by 2025 and reduce the deficit-to-GDP ratio from 6.5% to 3.0% by here 2028.

Diokno said the structural reforms and improved tax system instituted by the Duterte administration would ensure the government met its obligations.

The MTFF also proposes measures to further improve tax administration and enhance the fairness and efficiency of the tax system.

Diokno said he was confident that government revenue would continue to rise and the deficit would decline thanks to a strong economy, as evidenced by an overall gross domestic product growth rate of 7.4% in the second quarter.

The MTFF aims for economic expansion of 6.5% to 7.5% in 2022. Economic analysts consider this target to be the highest among ASEAN+3 countries.

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