Debt payments make up only 11.6 percent of proposed 2023 budget: Finance chief

ABS-CBN News

Posted at Aug 25 2022 02:55 PM | Updated as of Aug 25 2022 04:22 PM

MANILA - Debt service makes up just 11.6 percent of the proposed P5.268 trillion national budget for 2023, Finance Secretary Benjamin Diokno said Thursday.

Diokno issued the statement to clarify reports that debt payments would eat up one-third of the budget for the next fiscal year.

“Only 11.6 percent or P611.0 billion of the P5.268 trillion proposed 2023 National Budget is allocated for debt burden," Diokno said in a statement.

The total includes P582.3 billion for interest payments and P28.7 percent for net lending, he added.

The Department of Finance said an Inquirer article earlier said P1.6 trillion was allocated to debt service or 29.8 percent of the proposed budget.

But Diokno said the article erroneously added the principal amortization of P1.02 trillion as part of the expenditures.

He said principal amortization of debt is not included as an expense item under any accounting standard "being merely the settlement of debt obligations incurred from expenses already recorded in the past."

Principal amortization does not contribute to additional debt because debt obligation is only transferred from an old creditor to a new creditor in the process of refinancing, the Finance chief said. 

He added that while the share of debt burden in the 2023 budget is 0.8 percentage points higher than this year’s 10.8 percent, it remains lower than 2021’s 12.4 percent. 
 
Diokno has repeatedly said that the country's debt remains manageable and that the economy could outgrow it. 

The country's sovereign debt stood at P12.79 trillion or 62.1 percent of GDP as of the end of June. 

President Ferdinand Marcos Jr earlier said the administration aims to reduce the country's debt-to-GDP ratio to less than 60 percent by 2025 through its Medium-Term Fiscal Framework. 

“The implication is clear: we do not have to borrow as much as we did during the crisis years,” Diokno said.