P1 trillion 2006 national budget
Political Survival over
People’s Welfare
In theory, the national
budget can be a powerful mechanism for ensuring that public resources are
used for the welfare of the majority. Unfortunately, narrow interests have
perpetually hijacked the direction of Philippine economic policy and this
is fully reflected in the national government budgets annually drawn up
and implemented.
By Sonny Africa
Bulatlat
President Gloria Macapagal-Arroyo
said next year’s proposed P1.053 trillion expenditure program is “a potent
weapon for the permanent upliftment of the large mass of our people from
poverty.” And at first glance, the 2006 budget may seem an “improvement”
over last year’s. It is P134.6 billion more than the 2005 budget, which
could mean increased government resources going towards the people’s
welfare.
There are noticeable increases in
spending in economic services (by 24.8 percent), social services (15.6
percent) and general public services (13.8 percent) compared to 2005. At
the same time there is slower growth in debt servicing, which records a
mere 8.5 percent increase compared to the previous year. Correspondingly,
the share of economic services and social services to total expenditure
increased while that of debt service decreased.
But appearances can be deceptive, as
a closer look at the numbers will show.
Debt service grows
Despite a slowdown in the growth of
debt servicing, it still remains the largest item among expenditures in
the budget. The single largest chunk of the 2006 budget, more than 30
percent, will still go to paying interest on public debt, followed by
spending on education, 13.9 percent, and on communications, roads and
other transportation, 6.8 percent.
Debt service payments for interest
have been increasing since 1997, when they were 15.9 percent of total
expenditures, and have increased most rapidly under the Arroyo
administration. Between 2001 and 2004, the share of debt service to total
expenditures increased by 9.4 percentage points, compared to an increase
of only 8.8 percentage points between 1997 and 2001.
Conversely, spending on social
services has been going down. Examining trends from 2001 to 2006, the
share of education to the total budget has fallen from 17.4 percent to
13.9 percent, of health spending from 1.9 percent to 1.3 percent; and of
housing spending from 0.4 percent to 0.3 percent.
These trends should not be
surprising, given the skyrocketing public debt. As of August 2005, total
outstanding national government (NG) debt was at P3.94 trillion, a 66
percent increase from its P2.38 trillion level in 2001. This is equivalent
to some P46,244 of debt for each of the country’s 85.2 million Filipinos.
But the primacy of debt servicing in
the budget is underlined further when principal payments for the NG debt
are factored in. Only interest payments are included in the national
budget; principal payments are an “off-budget” item found in a separate
set of accounts called the NG Sources of Financing.
Total debt service payments have
risen almost three-fold from P274.4 billion in 2001 to a projected P721.7
billion in 2006, which is equivalent to 68.5 percent of the total
expenditure program for the year. This also means some P2 billion pesos in
total debt payments each day. In the 2006 budget, total debt service will
be: five times that of education spending (P146.5 billion); 53 times that
of health spending (P13.7 billion); and 262 times that of housing spending
(P2.8 billion).
The amount of total debt service
relative to the size of the economy is also growing. The last three years
have already seen this at all-time highs at an average 11.8 percent of
gross domestic product (GDP). The projection is for this to be at 12
percent in 2006, which will be the fourth straight year of record highs.
Falling social services
allocations
A closer look at the increased
allocations in social services is also revealing. The “increase” is mainly
found in a seemingly generous 46.2 percent increase in social security,
welfare and employment spending: from P40.1 billion in 2005 to P58.6
billion in 2006. But two-fifths (41.1 percent) of this budget goes just to
the pensions and gratuities of the 150,000-strong Armed Forces of the
Philippines (AFP). Moreover, P10 billion is going to “retirement benefits”
for tens of thousands of government employees who are going to be
retrenched next year.
Furthermore, education and health
spending have actually declined in real terms. Compared to 2001 levels,
real spending in 2006 on education will be 4.5 percent lower and on health
19.2 percent lower. Increasing population growth has also cut into per
capita spending. The Department of Education (DepEd) per capita budget per
public school student, for example, has fallen from P6,007 per enrollee in
2001 to P4,782 per enrollee in 2006, or a 20 percent decrease.
The DepEd also estimates that there
will be a need for an additional 10,549 classrooms, 1.2 million
chairs, 67 million textbooks, and 12,131 teachers in 2006, which they
already foresee will not be met by the 2006 budget.
Winning support from the favored
few
The people should have priority in
government spending, particularly the poor who rely on government-provided
essential services such as health and education that they cannot afford.
But it is clear that the Arroyo administration’s budget priorities are to
ensure its survival by courting the support of two vital sectors: the AFP
and local government officials.
Hence, proposed expenditures for
defense in the 2006 budget increased by P8.2 billion to P52.4 billion or
an 18.7 percent increase from 2005, which pushes the sector’s share in the
budget from 4.8 percent to five percent. But this only tells part of the
story. There are other budget items going to the military establishment or
for military objectives that are hidden in the economic, social and
general public services categories.
Altogether, actual military spending
for 2006 comes to a much higher P81.9 billion. These other
military-related items include P630.5 million for the Philippine Military
Academy (PMA), National Defence College (NDC) and Military Shrines Service
under “education, culture and manpower development”. The combined P1.4
billion budget of the two military hospitals, the Armed Forces of the
Philippines Medical Center (AFPMC) and Veterans Memorial Medical Center (VMMC),
are categorized under “health” and, at 10 percent of the total health
sector budget, they actually even account for a disproportionate share of
it.
There is also the P24.3-billion
worth of pensions and gratuities and for the Philippine Veterans Affairs
Office (PVAO) under “social security, welfare and employment,” which is a
huge 42 percent of the total social security, welfare and employment
budget. There is a further total P3 billion allocation under the direction
of the Department of National Defense (DND) and Office of the Presidential
Adviser on the Peace Process (OPAPP) for the counter-insurgency
Kalayaan Barangay Program for 500 conflict areas. These are “special
purpose funds” split between the “other economic services” and “other
social services” categories. Finally, there is also an additional P85
million for the Office of Civil Defence (OCD) under “public order and
safety.”
The Arroyo administration is also
using NG budget resources to gain the support of provincial governors and
mayors in local government units. They already came out in force during
the president’s state-of-the-nation (SONA) address at the opening of
Congress in July and regularly mobilize rent-a-crowds to counter local
anti-Arroyo mass actions. Allocations for capital outlays – traditionally
the most expedient sources of pork barrel kickbacks – increased by a
massive 37.7 percent in 2006 to P133.2 billion.
Using the budget for public
welfare
In theory, the national budget can
be a powerful mechanism for ensuring that public resources are used for
the welfare of the majority. Government revenues, mainly generated through
taxes, can be used for vital economic, social and public services.
Unfortunately, narrow interests have perpetually hijacked the direction of
Philippine economic policy and this is fully reflected in the NG budgets
annually drawn up and implemented.
The Philippines is in the middle of
a deep economic crisis and the people suffer from intensifying poverty,
falling incomes, rising prices and high level of joblessness. Government
should at least use its budget to mitigate the harsh impacts of these on
the people.
However, the domination of elite
interests prevents this from happening. Instead, the Arroyo administration
is gearing the national budget towards gaining “investor and creditor
confidence” and towards its political survival.
The 2006 proposed budget can best be
described as a “creditors’ budget,” insofar as it continues to favor the
interests of commercial banks and multilateral agencies that hold the
country’s debt. Despite popular calls for a more progressive debt
management policy – involving cancellation of the most odious debts and a
debt cap on payments and new borrowings – government continues to defer to
the country’s creditors.
Even worse, government has done
little to address the endemic problem of corruption that robs it of
millions in lost revenues. Further, it also refuses to tackle the problem
of large amounts of foregone revenues due to steep tariff cuts and
too-generous incentives to foreign investors. Instead, it passes on the
cost of debt servicing to the people through onerous measures such as the
Reformed Value-Added Tax, which will result in higher prices of basic
goods and services. It also undertakes an “austerity” problem that hits
social services the worst.
The administration’s budget for 2006
is also a “survival budget.” The Presidency faces a grave crisis of
legitimacy as a result of perceived corruption reaching to Malacañang
Palace and, more significantly, widespread belief of presidential-level
electoral fraud in the 2004 national elections. Its reaction has been to
aim to consolidate support from the military and police, on one hand, and
from civilian local government units (LGUs), on the other, through
increasing resources for presidential patronage. It is also financing the
stifling of dissent in the cities and greater militarization in the
countryside.
Given these realities, it is clear
that the present administration will never pass a budget that can truly be
called “pro-people.” A national government that truly upholds the
interests and welfare of the majority can only arise as a result of the
continued struggles of the people for genuine and fundamental political
and economic change. IBON Features /Posted by Bulatlat
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