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Loren warns of growing public debt

December 28, 2009

SENATOR LOREN LEGARDA YESTERDAY WARNED OF A WORSE FISCAL CRISIS NEXT YEAR DUE TO THE “EXTRAVAGANCE AND OVER-BORROWING OF THE ARROYO ADMINISTRATION” IN THE PAST NINE YEARS.
Loren issued the warning after Moody’s Investors Service reported that 2010 may prove to be a “tumultuous year” for sovereign debt issuers and this includes the Philippines.”
Loren said that this means that the Philippines would have a hard time soliciting foreign loans next year to fund its requirements not only for necessary social and economic projects but also for government operations.
Moody’s reported that “the global economy in starting to recover next year could unleash volatility in the financial markets for borrowers like the Philippines, because the economies around the world will need to properly time their exits from stimulus-funding strategies—not too quickly to ‘choke off growth’ and not too slowly as to ‘unsettle financial markets’.”
Moody’s observed that the Philippines is looking to limit next year’s budget deficit to P233.4 billion after a likely record gap of P300 billion this year and is looking at a possible euro-denominated bond offer and a samurai bond issue as part of a $2-billion foreign debt plan to fund the 2010 budget gap.
“But because of the fiscal irresponsibility, overspending, corruption and over-borrowing of the administration, the government may find it extremely difficult next year to acquire loans to finance our national and local needs,” said Loren.
She pointed out that the national government debt increased by 2.5 % or P105 billion last August to P4.233 trillion, according to the Bureau of Treasury.
Total outstanding debt stood at P4.338 trillion of which, P1.914 trillion or 44% is owed to foreign creditors and P2.424 trillion or 56% to domestic creditors. The increase in domestic debt of P115 billion or 5.0% from the recorded ending August 2009 level was due to the net issues of government securities made by the national government.
Loren also deplored the so-called stimulus package released by Malacañang earlier this year failed to improve the economy as economic growth reached near negative growth and unemployment continued to remain high.
“We need to elect a new administration in 2010 that can strengthen our economy in the midst of the continuing global financial crisis, one that is fiscally responsible and that would introduce real growth to solve our unemployment and poverty problems,” Loren stated.