Recto: Debt service item in 2011 budget 'inflated' by P7.7B

The P357-billion allotment for interest payments under the proposed 2011 national budget may have been inflated by as much as P7.7 billion, Sen. Ralph Recto said Tuesday. Of P357 billion allocated by the government for interest payments, P120.8 billion was set aside to service foreign obligations, a figure premised on a P47:$1 exchange rate, said the senator. "A high assumption, in the light of emerging consensus among banks that the peso could strengthen to at least 43 to a dollar next year," Recto explained. The Standard Chartered Bank expected the peso to strengthen at P43-$1 by the end of 2011, while HongKong and Shanghai Banking Corp. and Goldman Sachs predicted peso would surge to P42.50-$1 and P42-$1, respectively. On Tuesday, the peso closed at P44-$1. The peso-dollar exchange rate, if used in the computation, would reduce the allotment to P113.2 billion and free up P7.7 million from the 2011 budget. At P45-$1, the interest payment would drop from P120.8 billion to P115.7 billion — a difference of P5.1 billion. Recto said the interest payments might have been "deliberately bloated to create a buffer in the event tax collection fails." The Aquino administration said that it does not need congressional authority to spend automatic appropriations such as interest payments, the senator noted. Only P933.5 billion worth of expenditures in the national budget were submitted to the Congress for approval. Recto suggested that the government use the leftover budget to support the budget for improving public hospitals, infrastructure, or whatever sector the President wants to prioritize. —Kimberly Jane Tan/VS GMANews.TV