News Update A ceiling on govt debt is bad for spending, says DBM’s Abad

Putting a cap on public sector debt will have a negative impact on government spending in critical social services and infrastructure, Budget and Management Secretary Florencio Abad said Thursday. This is why President Benigno Aquino III vetoed the debt ceiling under the 2012 budget, Abad noted. Aquino signed the P1.816 trillion General Appropriations Act for 2012 on Wednesday. The provision vetoed by President Aquino states that “the total indebtedness of the national government and any of its agencies, offices, GOCCs, which carry the sovereign guaranty of the Republic of the Philippines, shall not exceed 60 percent of the latest GDP.” Abad noted the public sector debt stood at 73.3 percent of gross domestic product (GDP) as if 2010, or beyond the 60-percent debt cap provision inserted by Congress in the General Appropriations Bill. Despite the presidential veto on the debt ceiling, Abad said the Aquino administration remains committed to narrowing the fiscal deficit and public sector debt in the medium-term. “Fiscal consolidation efforts have so far gained ground, leading to increased investor and creditor confidence in the country,” he said. On debt management, fiscal authorities have lowered interest costs and extended maturities to an average of 9.2 years as of July 2011 from an average of 7.9 years as of June 2010, he said. Savings from interest payments have reached P35.6 billion as of end-October. Abad said. "With this, the share of the debt burden, including interest payments, on the national budget has been decreasing from 20.6 percent in 2010 to 19.6 percent in 2012," he said. — VS,