MANILA, Philippines – The Department of Finance (DOF) is expecting the government’s debt stock to climb to P4.723 trillion in 2010 or P234 billion more than the programmed P4.489 trillion for this year.

The P4.723 trillion debt stock is also P34 billion more than the previous target of P4.689 trillion for 2010.

As a percentage of gross domestic product (GDP), the P4.723 trillion programmed debt stock for 2010 is 56.7 percent while the P4.689 trillion target for 2009 is 56.3 percent.

Of the amount, debt owed to local lenders is expected to reach P2.771 trillion next year while the amount of foreign debt has been programmed to hit P1.952 trillion.

Finance Undersecretary Gil Beltran said the upward revision in next year’s debt stock program is due to the wider-than-expected budget deficit in 2010 of P233.4 billion or 2.8 percent of GDP.

Next year’s deficit ceiling has been revised from the previous program of P208 billion or 0.9 percent of GDP.

Beltran said the higher deficit is only temporary as the government needs to pump-prime the economy because of the impact of the global financial crisis.

“We are pump-priming the economy. It won’t be forever. It is not a prudent fiscal policy if you allow the deficit to exceed three percent of GDP for two years,” Beltran said.

The Finance department wanted to cut debt by 50 percent this year and raise the revenue effort to 20 percent from 16 percent.

It earlier planned to improve the debt to GDP ratio to 55.7 percent this year and to 53.4 percent in 2010 but this program would now have to be shelved as the country copes with the worldwide economic crisis.

The DOF said that because of the country’s high debt level, the government needs new sources of revenues.

These include measures to raise sin taxes, rationalize tax incentives and to simplify the country’s net income taxation system.

According to government estimates, the sin tax measure could raise as much as P19 to P20 billion in the first year of implemenation, P30 to P40 billion in the second year, P40 to P50 billion in the third year and P60 to P70 billion in the fourth year.

The department said that the current tax structure is inequitable because products having the same current net retail price can be taxed differently if one was introduced before January 1997 and other one after 1997.

The government, meanwhile, expects to raise P10 billion a year from the measure seeking to rationalize fiscal incentives and another P6 billion a year from the measure seeking to simplify the country’s net income taxation scheme

Source: Iris C. Gonzales