Kept afloat by debt
In December 2004, the reactionary government was indebted to the tune of P3.8 trillion ($70 billion)�a 13.6% increase compared to the figure at the end of 2003. If we include debts incurred by public corporations as well as those guaranteed by government, the Philippines' total public debt would come to P5.9 trillion ($108.7 billion).
Expected revenues for 2005 will be insufficient to service debts due for payment this year. To make up for the anticipated budget deficit that would result, the Arroyo regime will once more need to go on a borrowing spree. It floated $1.5 billion worth of bonds in January, and is expected to incur up to $4 billion more in debts within the year.
For a long time, the reactionary government has been able to keep up its operations only through massive borrowing. Local export-oriented production has collapsed due to shrinking foreign markets for Philippine exports.
There has been no significant foreign capital infusion. In fact, for the third straight year, foreign capital investments have fallen short of $1 billion. In 2004, foreign investments declined by 54% ($680 million) compared to 2003. As in the last five years, direct capital investment was geared only towards the telecommunications sector, and this year, the expansion of San Miguel Corporation which was effected with additional capitalization from Kirin Brewery Inc. of Japan.
The country's balance of payments deficit came to $595 million in 2004 and was prevented from skyrocketing only through government borrowing ($1.5 billion this January) and overseas contract workers' remittances ($8.5 billion in 2004, the biggest so far).
To convince them to accept the slew of new taxes, the US-Arroyo regime claims that it is the people who will benefit from the tax revenues that will be raised. But the 2005 budget hurriedly approved by both congress and the senate contradicts this.
A study prepared by economists states that up to 60% or P545 billion of the P908 billion national budget has been automatically allotted to debt service and 30% for internal expenses of the reactionary government and military. A huge amount has been set aside for the much-despised pork barrel of politicians. A mere 10% is left for education, health and other basic services.
Compared to the past five years, the percentage allotted for basic services continues to dwindle, with only 2.5% of national income going to education and 0.3% to health services.
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