Press Release
January 3, 2007

Debt service for 07 padded by P6.6 B - Recto
Use this instead to fund both school-feeding,
school-building and end budget deadlock

Senator Ralph Recto today proposed a way out of the Senate-House deadlock on the P1.126 trillion 2007 national budget through a formula that would fund both the food-for-school program of the government and the construction of more schools.

In the first place, this should not be an either or situation in which you choose one over the other. Why not choose both so that children can have their food and their new classrooms? Recto said.

In its version of the 2007 spending measure, the Senate scrapped the P4.7 billion allocation for the program that would grant a kilo of rice to a grade schooler from a poor family for every day of class attended.

The Senate had in turn proposed that the amount be used to build more classrooms and hire additional teachers to wipeout shortages in both.

But Recto insisted that budget space can be created to accommodate two worthwhile programs that should not be made to compete against each other for funds.

One way of doing this, he said, is to reduce the allocation for debt service in view of the continued strengthening of the peso, a move that will free enough resources to fund school initiatives.

Recto said next years P318.8 billion allocation for debt service is padded by at least P6.6 billion due to imprecise foreign exchange assumption.

Recto said the foreign component of the debt service fund was computed using a US$1- P53 exchange rate, above the projected average for year.

At yesterdays close however, the peso was trading 48.91 to the greenback, consistent with analysts projection that good fiscal numbers of the government would keep the local currency from breaching the 50 to a US dollar level this year.

The government is scheduled to pay its foreign creditors US$2.209 billion in interest expense next year. By using a 53 pesos to a US dollar exchange rate, the amount earmarked for this in the national budget is P117.06 billion, Recto explained.

But by adopting a lower but realistic P50 to US$1 exchange rate, interest payments on foreign liabilities will go down to P110.45 billion, Recto said.

This will free up P6.6 billion in non-productive expense for social services. I am recommending that this be used for education project instead. This debt-for-education scheme can end the deadlock over the budget, Recto said.

As to concerns that the rice distribution program can be used for electioneering, Recto said safeguards can be instituted so that a notable program will not be hijacked for political ends.

We can set the conditions that bulk of the program will commence in June, next school year, which is after May elections. We can also impose the requirement that as much as possible the rice to be distributed be procured locally, Recto said.

We can expand the menu so it wont be devoted solely to rice only, so that locally available and abundant food, like vegetables in the Cordilleras be the staple that would be distributed in the region, he said.

We can also ask the National Nutrition Council to come up with food preparations that would satisfy basic nutritional requirements. We can also allot a portion of the amount for the establishment of gardens and food banks, Recto said.

The basic idea is to have a cafeteria approach that would tap local food resources and community to the hilt in solving illiteracy and malnutrition, he said.

The standoff on the budget can be ended if parties involve in budget reconciliation will not adopt a winner take all mentality, he said.

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