Recto: Channel P15 B debt savings to health, schools

A surging peso would lessen interest payments on government debt this year by at least P8.8 billion, savings Sen. Ralph Recto wants the government to frontload on health and education.

But actual savings on debt service could surge to P15 billion, Recto said, if other factors such as lower interest rates are considered.

In fact, the latest government projection, the one released by the Development and Budget Coordination Committee last month, already pegs debt service this year at P303 billion, Recto said.

Recto insisted that foregone spending for debt should be plowed back to social services and not be used for debt retirement.

There is the temptation to prepay some of our debts. But let us not fall for this. Let us use the money saved on interest payments for our schools and hospitals instead, he said.

While the budget for the Health and Education departments got marked increases this year as a result of better revenue collections the fund augmentation as reflected in the P1.126 trillion 2007 national budget is not enough to meet actual needs, Recto noted

Our DepEd budget will increase by P15.4 billion to P128.6 billion this year but we will still end the year with a backlog of 8,000 plus classrooms, he said.

The DoH budget of P11.5 billion translates to a 129-peso annual budget per Filipino. Even if we double that amount to reflect total public health sector spending this year the resulting per capita expenditure for health is still measly, Recto said. So why not augment health and education spending from what we are sure to save from debt service? he said.

With P3.7 billion we can wipeout the backlog in classrooms, and we are talking of P15 billion in savings here. With P2 billion we can modernize the Philippine General Hospital, he said.

The 2007 national budget, now officially known as Republic Act 9401, earmarks P318.1 billion for interest payments, a figure premised on a faulty assumption, Recto said.

Recto said the foreign component of the P318.1 billion fund was computed using a US$1- P53 exchange rate. However, for months now, the peso has been treading below or near the 49 to a greenback range.

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

But a surge of the peso would mean that every one-peso appreciation of the local currency versus the US dollar would reduce the interest payments on foreign debt by P2.2 billion.

We can say that the amount for debt service is overappropriated. What government can do is rechannel the excess allocation to our hospitals and schools, or even roads and agriculture, and not to remit this to our creditors to pre-terminate our debts," he said.