Sen. Arroyo hits Palace veto of provision on debt cap in 2012 national budget

Senator Joker Arroyo

Senator Joker Arroyo lashed out at Malacañang for vetoing the debt cap provision that the Senate included in the 2012 budget, saying the country is on its way to joining distressed European economies burdened by overborrowing.

He said the provision’s removal meant that there would be no limit to the amount that Malacañang could borrow from creditors.

Budget Secretary Florencio Abad acknowledged that President Benigno Aquino III had vetoed six items in the newly signed P1.8-trillion national budget for next year and that the “biggest” item was the debt cap.

Abad said the five other items vetoed by Mr. Aquino were “riders that are really the prerogative of the Executive and not the proper venue for introducing amendments to the law.”

In an interview, Arroyo said the debt cap provision would have required Malacañang to get Congress’ permission before it could borrow funds equivalent to more than 60 percent of the gross domestic product (GDP), the value of goods produced and services rendered in the country in a given period.

Arroyo recalled that during the budget deliberations, the Senate planned to impose a borrowing cap of 50 percent of  the GDP.

The senator said it was Finance Secretary Cesar Purisima who told the Senate that every 5 percent of the GDP translated to P500 billion when the latter haggled for a 60-percent limit.

Arroyo said he was told that Malacañang now even wanted to borrow amounts equivalent to 73 percent of the GDP.

“Governments in Europe are now on the verge of bankruptcy because they overborrowed. Now, when (our) government is overborrowing, we would not know because the executive (branch) has no cap on borrowings,” he said at a news conference.

“Now it turns out the President wanted to borrow 73 percent of the GDP. I don’t know now how much is that kind of money. We have to learn also from lessons of other countries. We are not feeling it yet but what has befallen European countries will also befall us. We should be wary,” Arroyo added.

Not practical

Explaining why Mr. Aquino vetoed the 60 percent cap on the government’s debt payments, Abad said this was because it was not practical.

“You know at the end of 2010, it was already 73 percent. But for us, the real reason is that we have been prudently and effectively managing our liabilities. In fact, if you look at our budget, the share of interest payments to the total budget has gone down by 3 percent and this year, we expect to save somewhere in the area of P37 billion from interest payments,” Abad told reporters shortly after the President signed the budget measure into law.