Gov't debt to rise given worsening budget deficit

National Government debt is expected to rise to P4.833 trillion this year, P110 billion above the previous estimate because of a worse than projected budget deficit, data from the Finance department showed. "It's because of the deficit. Since we adjusted the [deficit] program, we have to change the debt projections," Finance Undersecretary Gil Beltran said on Tuesday. The state is expected to incur a budget gap of P293 billion this year, worse than the P233.4-billion original program. The government incurs a deficit when it spends more than it can earn. To finance the gap, the state borrows either locally or abroad or both, leading to rising debt. Of the P4.833-trillion debt, P2.822 trillion is owed to local creditors, while the balance is owed to foreign lenders. This year's projected debt stock is 58 percent of the gross domestic product (GDP). Beltran claimed the higher deficit was temporary since the government needs to continue pump-priming the economy given the lingering effects of the global economic slump. "We are working hard to raise revenues and to enhance our collections," he added. The government's debt stock climbed to P4.424 trillion at the end of October 2009 after it borrowed $1 billion from the global bond market and as a result of the peso's depreciation against the dollar, data from the Treasury bureau showed. Total outstanding debt increased by 2 percent or P86 billion from the end-September level of P4.338 trillion. The Finance department noted that because of the country's high debt level, the government needs new sources of revenues. These include measures to raise sin taxes, rationalize tax incentives and simplify the country's net income taxation system. According to government estimates, the sin tax measure could raise as much as P19 to P20 billion in the first year of implementation, P30 to P40 billion in the second year, P40 to P50 billion in the third year and P60 to P70 billion in the fourth year. The government also expects to raise P10 billion yearly from the proposed measure seeking to rationalize fiscal incentives, and another P6 billion once the government simplifies its income taxation scheme. GMANews.TV