DoF says debt service bill only 11.6% of 2023 budget

Finance Secretary Benjamin E. Diokno answers questions from the media during a press briefing at the new executive building in Malacañan Palace on July 6. — PHILIPPINE STAR/ KRIZ JOHN ROSALES

FINANCE Secretary Benjamin E. Diokno said the debt service bill was 11.6% of the proposed 2023 budget, dismissing a report that said payments would amount to nearly 30% of government spending.

“Only 11.6% or 611 billion pesos out of the 5,268 trillion 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 lending,” Diokno said in a statement from the Ministry of Finance (DoF) on Thursday.

He said the 11.6% total was reflected in the popular budget primer from the Ministry of Budget and Management.

He dismissed a newspaper report that said the debt service bill amounted to 1.6 trillion pesos, or 29.8 percent of budget spending. The DoF said the newspaper miscalculated the principal amortization of 1.02 trillion pesos as part of the expenses.

The DoF said amortization of principal is not considered an expense item in accounting because it is “simply the settlement of debts incurred from expenses already recorded in the past.”

The amortization of the principal implies that the obligation is “transferred from an old creditor to a new creditor only in the course of renewal”.Ifnancing.

The debt service bill as a share of the budget is 0.8 percentage point higher than the 10.8% in 2022, but lower than the 12.4% posted in 2021.

Last week, Diokno told both houses of Congress that the debt burden was manageable despite external shocks, as 75% of debt was expected to come from domestic sources by the end of the year.

Most of the national debt is also long-term, spread out and assumed at the lowest possible rate, he added in the statement.

Outstanding debt as a percentage of gross domestic product (GDP) fell to 62.1% at the end of June, after the national debt hit a record 12.79 trillion pesos.

Based on the proposed national budget for 2023, outstanding debt is projected at 14.63 trillion pesos by the end of 2023, with principal payments set at 1.6 trillion pesos that year .

The government estimates that the debt-to-GDP ratio will fall to 61.3% next year, from 62.1% at the end of June, and the budget deficit to 6.1% of GDP in 2023, from an estimated 7.6% in 2022. .

Government revenues, supported by the reopening of the economy, will reduce the deficit, Diokno said, citing the 7.4% economic expansion in the second quarter.

The government expects the economy to grow by 6.5-7.5% this year and 6.5-8% between next year and 2028.

“Economic analysts consider this target to be the highest expected growth rate among ASEAN+3 (Association of Southeast Asian Nations+3) countries, which include Japan, South Korea, South and China,” the DoF said. — Diego Gabriel C.Robles

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