MANILA, Philippines ? The proposed budget for interest payments in 2011 may have been overstated by up to P7.7 billion but Congress could no longer touch this after Malacanang's move to shield debt service from congressional review, a senator said on Tuesday.

Recto said the government used a ?high assumption? of P47:$1 exchange rate when it computed the amount that would be used to service foreign obligations.

Of the P357 billion budget set aside for interest payments next year, P120.8 billion was allotted for foreign obligations.

?The P120.8 billion, however, was premised on a P47:$1 exchange rate, a high assumption, in the light of emerging consensus among banks that the peso could strengthen to at least P43 to a dollar next year,? the senator said in a statement.

Recto said Standard Chartered forecast the peso to reach P43 against the US dollar by end of 2011 while HSBC and Goldman Sachs were more bullish, predicting the peso to surge to P42.50 and P42, respectively.
Adopting a P45:$1 exchange rate, the senator said, would reduce interest payment allocation from P120.8 billion to P115.7 billion or a difference of P5.1 billion and a P44:$1 benchmark would further whittle it to P113.2 billion, which would free up P7.7 billion for ?productive expenditures.

Recto said the amount between P5 billion and P7 billion could be used to augment the budget for the improvement of public hospitals or added to the P15 billion seed fund for public-private partnership in infrastructure.

But in its submission of the proposed national budget for next year, the government did not include a total of P711 billion automatic appropriations for congressional approval.

Those deemed automatically appropriated are debt service, the Internal Revenue Allocation for local government units, retirement and life insurance premiums of government employees and customs duties paid by the government.

Recto, an administration ally, was opposed to this move by the Palace to exclude the automatic appropriations from congressional review.

?Automatic appropriations are now clothed with the cloak of infallibility. The new dictum it seems is that automatic appropriations are automatically correct that they are beyond scrutiny and possbly correction by Congress,? said the senator.

Recto suspected that the interest payments for next year were ?deliberately bloated to create a buffer in the event tax collection fails.

It could also be because of apprehensions, Recto said, lawmakers would reduce the amount for debt service and convert the savings into ?pork.?

?If the worry of executive branch is that interest payments will be carved up into small pork slabs, then my suggestion is that not a single centavo of funds transferred from interest payments will end up in legislators' allocations,' Recto said.

To allay this fear, Recto proposed to give the ?sole monopoly in doing the realignment? to the executive branch.