Debt black hole

Time now for a reckoning with the country’s seemingly apocalyptic debt now that we know nearly a third of this administration’s proposed budget will be used to repay the previous administration’s massive loans.

Before anything else, it’s not that we’re against paying off the country’s public debt. Government must honor and settle debt if it is sustainable to do so.

But even if we acknowledge that government is the steward of the nation’s finances and that we must leave it to government’s financial gatekeepers to do their best work, it doesn’t mean we don’t have the right to ask for a full disclosure on that mounting pile of debt.

Anyway, before going any further, we first need to be familiar with how this government will pay off our huge loans or, in formal terms, debt service.

Debt servicing will eat up a big chunk of the proposed budget as the government will repay a record P1.6 trillion in debts next year, the highest yearly debt servicing on record.

Next year’s debt service will be bigger than the P1.26 trillion set aside to repay maturing obligations this year.

In 2023, the government will settle P1.35 trillion in domestic debts (up from P1.02 trillion this year), and P253.8 billion in foreign obligations (up from this year’s P240.1 billion).

Debt payments under next year’s national budget will also include a record P1.02 trillion in principal amortization (up from P751.1 billion this year), on top of P582.3 billion in interest payments (up from this year’s P512.6 billion).

Despite the planned huge repayments, the national government’s outstanding debt will still jump to a new high of P14.63 trillion (from the current P11.6 trillion) by the end of 2023 as the Marcos administration seeks more loans.

As we all know by now, the massive loans contracted in recent years were for battling Covid-19.

Essentially, there’s nothing wrong here. The pandemic was and continues to be an existential crisis; and protecting the health and welfare of the citizenry against such a threat is a legitimate, indeed an essential, role of the state.

Having said that, however, begs also an unavoidable prickly thought: Were those massive loans used properly and responsibly?

Current budget officials say we have nothing to worry about.

Budget Secretary Amenah Pangandaman, for instance, optimistically says the debt “incurred in recent years has been put into good use, such as on productive investments in infrastructure and human capital, as well as in recovery and health programs amid the pandemic.”

But House Deputy Speaker Ralph Recto on Monday isn’t so convinced.

Mr. Recto is pressing Congress to thoroughly tackle spending delays and questionable procurement — now being exposed by ongoing Commission on Audit reports — of the previous budget during the 2023 budget deliberations.

“When it comes to public spending, the problem is not in budget authorization, or when Congress approves the budget, but in budget execution, when agencies spend the budget given to them,” Recto says.

“The budget is supposed to be spent for the right purpose, at the right time, by the right agency, for the right price,” he adds.

Mr. Recto’s “continuing indictment” of how things went is essentially about this question: Did corruption, waste, misallocation, and misappropriation of resources contribute to the debt problem?
We need a clear definite answer here if only because there’s an inescapable hair-raising political dimension to it.

Pivoting to the political dimension unravels, for instance, the moral worry that officials may have thrown caution to the wind when they resorted to massive borrowings.

As a consequence, we can then ask the question if they had excessively relied on massive borrowings simply because future generations, who will surely bear the burden of government’s obligations, lack political voice to object.

Not conclusively addressing that political question means we won’t know if those who officially dealt with loans had indeed succumbed to such a temptation; or worse, means we can’t hold accountable those who suspiciously squandered monies from loans.

More importantly, however, not finding out what happened to the loans even damages this government’s revival efforts.

Not knowing where the loans went, for instance, allows legislators to easily approve the trillion-peso budget even without making hard decisions on what spending programs were abused by profligate government agencies, which had sunk us into the black hole of debt in the first place.



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