Posts tagged with debt servicing

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August 28, 2010

Initial observations of the 2011 Aquino budget

President Benigno "Noynoy" Aquino III (photo from www.gov.ph)

The Aquino Administration submitted its budget proposal for 2011 to Congress this week. It is through the budget where one can see the priorities of the government, in how much it intends to spend on various programs of government. For 2011, the government under the Aquino administration intends to spend P1.645 trillion.

In his budget message, the President claimed that the spending proposal of the government for next year is anchored on “reform”. The budget claims to have a “bias to the poor and the vulnerable”. However, right at the onset, it is still oriented towards severe austerity, masked with the euphemism “fiscal responsibility,” a government spending orientation that has been the standard policy for decades. It is a policy intended not to simply ensure that the “meager resources” of the government are spent wisely for the people, to ensure that the government is able to pay its foreign and local creditors its monstrous, anomalous and scandalous debt.

Just to show you how scandalous and hypocritical the government’s budget orientation is, the Aquino Administration proposes to pay foreign creditors and financial institutions a whopping P823.27 billion next year (P357.09 billion in interest payments, P466.18 billion in principal amortization not formally included in the P1.645 trillion total budget). According to the initial budget analysis and report of IBON Foundation, the increase in interest payments alone “is the largest absolute increase in interest payments in the country’s history and, at a 29.2% increase from the year before, is the second largest percentage increase after the 32.6% growth in 2000.”

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September 19, 2009

State abandonment of higher education

This table shows the share of state subsidy and internally-generated income in state universities and colleges’ (SUC) total operating budget through the years. What is evident is that SUC’s are being forced to rely less and less on government subsidy and more and more on internally-generated income (in the form of tuition and other student fees, privatization of assets, etc.).

One sector which has always suffered from the government’s policy of contracting spending for social services in favor of continued debt servicing is the sector of higher education. When I was still in UP, I had friends who abhorred militant activists and the “leftist” slogans. One of the state policies they continuously deny is existing is “state abandonment of education.”

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Contracting social services, taxing the people dry

It has always been a priority for the Arroyo administration to “balance the budget”””meaning, to decrease the gap between government revenues and government spending.

In plain reading, this is good. Trimming the budget deficit should mean less borrowing, and eventually more money for health, education and other social services. However, the goal of balancing the budget under the Arroyo administration, and even before, has always been to ensure the payment of our debt obligations, unfortunately at the expense of social services spending.

To make matters for ordinary citizens worse, in order to balance the budget and earn more revenues, the government, for years, has always put a stress on consumer taxes (E-VAT, sin taxes, proposed text tax) instead of directly taxing corporations and high-income tycoons, instead of taxing imports or plugging the leaks from corruption. In the age of trade liberalization and globalization, government would rather give rich foreign investors, high-income tycoons and importers tariff cuts, tax holidays and other tax incentives.

Aside from taxing the consumer, government has also been selling its assets and privatizing services and public utilities in an effort to hide its poor and lopsided tax effort. This results to private companies concerned largely with profit and not with public service controlling public utilities. Thus, the high power and water rates we experience.

When corruption and smuggling comes into the picture, we arrive at the terrible fiscal decay we find ourselves in. Ordinary people are being taxed dry, and yet social services are continuously deteriorating, and despite all these, our debt just keeps growing and growing.

Below are some graphs that would illustrate the trend of the government in its budget proposals for the past years.

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