2011 proposed budget an austerity to repay debt

Most of this increase is accounted for by the large PhP80.9 billion increase in interest payments on debt to PhP357.1 billion

Research group IBON calls the proposed 2011 National Government (NG) budget submitted to Congress an austerity budget to be able to keep repaying debt, adding that the proposed budget is not consistent with long-term economic and social development.

The PhP1.645-billion NG budget for 2011 is a PhP104.4-billion or 6.8%-increase from the proposed budget for 2010. However most of this increase is accounted for by the large PhP80.9 billion increase in interest payments on debt to PhP357.1 billion. This 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. The government is proposing to pay for this by retreating from its responsibilities in key areas.

IBON noted that there is a large drop in the budget for economic services which falls by 9.5% from PhP398.9 billion in 2010 to PhP361.1 billion in 2011. The budget contractions are particularly large in the sectors of: agriculture and agrarian reform (falling by PhP23.1 billion or 26.0%), communication, roads and other transportation (PhP7.9 billion or 5.2%), water resources development and flood control (PhP4 billion or 21.4%), and power and energy (PhP3.4 billion or 65.5%). This alarmingly creates the justification for the further privatization of critical public infrastructure, even as diminishing government engagement undermines its capacity to regulate.

In social services, the already insufficient health budget falls even further by 3.5% from PhP40 billion to PhP38.6 billion. Government is not even able to approach the same level of real per capita health spending that reached its peak in 1997. The budget for housing meanwhile is barely changed with only a weak PhP273-million increase in its budget to PhP5.7 billion. There is however a welcome PhP31.1-billion or 12.9%-increase in the education budget which supposedly goes to building much-needed new classrooms and hiring of additional teachers.

Yet despite austerity the government still finds the funds to wage war – the budget of the Armed Forces of the Philippines (AFP), which has been accused of serious human rights violations, increases by PhP10 billion or 17.9% to PhP65.8 billion in 2011. It is also possible that part of the likewise large PhP6.6-billion or 13.2%-increase in the budget for the Philippine National Police (PNP) goes to its forces engaged in counter-insurgency.

The government has used its fiscal crisis – invoking revenue constraint – as an excuse to shirk its larger responsibilities to use the national budget, among other policy tools, to direct the country’s social and economic development. Yet it is possible for it to begin putting in place a progressive revenue system that taxes those with the greatest ability to pay and direct spending to those most in need. In the absence of this, its debt will continue to rise and its budgets will fail to meet the people’s real immediate and long-term needs. (end)

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