Only Palace can end budget stalemate

Senator Ralph Recto today called on the governments economic managers to throw in the towel and graciously concede that calculations for this years debts service exceeded by P6.6 billion.

Recto said their admission that interest payments were overestimated is key to ending the stalemate on the P1.126 trillion national budget for 2007.

The solution actually lies on the hands of the executive. If they say that the assumptions used in computing debt service do not hold anymore, then we can free funds that will finance the contentious items on the budget which triggered the deadlock, Recto said.

The discrepancy is as clear as daylight. There is no other way but to admit the mistake. P6.6 billion is such a big amount to be dismissed as within the acceptable margin of error, Recto said.

Recto theorized that the government is deliberately inflating the debt service fund so it can incur savings at the end of the fiscal year, savings which can be spent outside the appropriations authority granted by Congress.

Recto pointed out that this 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. This can be used to fund both the food-for-school program of the government and the construction of more schools.

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.