While he lauded both Houses of Congress for their “swift yet thorough deliberations on the budget,” the President rejected the debt service ceiling provision, citing the steady decline in the debt service to Gross Domestic Product (GDP) ratio of the government in the last six years.

“This will be the first time in eleven years that the budget will be signed into law in the same year that it was submitted. [It has] proven that Congress is indeed serious about the primary duty of the legislature. The budget is the most important act of any Congress. Its early passage means that the much-needed programs for poverty alleviation and development can be implemented earlier,” Aquino said.

The Chief Executive signed into law the 2011 Reform Budget in the presence of the members of the Legislature headed by Senate President Juan Ponce Enrile and House Speaker Feliciano Belmonte, Jr. and other members of the Cabinet.

“This will enable us to address the urgent needs of our people in a timely manner This budget demonstrates our commitment to solving the problems of our people at the soonest time. This alleviates the burdens especially of the most disadvantaged,” he added.

Aquino pointed out the need to implement “gradually” the debt cap provision. Under the present system, debt service payment is automatically appropriated. For 2011, debt service payment amounts to P823.3 billion, up by P80.5 billion from this year’s P742.8 billion.

“While the adoption of a formal debt policy in the form of a debt cap shows sincere effort to manage our fiscal woes, the same has to be gradually implemented over the medium term. Certainly the imposition of a 55 percent debt cap at this point in time and the prior legislative approval of borrowings exceeding this ceiling are unduly restrictive as they prevent the government from taking advantage of favorable market conditions,” Aquino said.

In the past seven years, we have managed to bring down the public sector non-financial debt from 100.8 percent in 2003 to 60.8 percent of GDP in 2009. On the other hand, the national government debt has been reduced during the same period from 77.7 percent in 2003 to 57.3 percent of GDP by end 2009.

The other items vetoed by the President are:
• General Provisions, Sec. 14, “Government Indebtedness and Guaranty,” Imposition of 55 percent debt cap as “unduly restrictive,” wherein the government “should be given the flexibility to borrow responsibly.”
• General Provisions, Sec. 71, “Release of Lump-sum Appropriations,” which requires legislative consultation in the release and implementation of all lump-sum appropriations in the GAA;
• DA- OSEC Special Provision No. 3 , “Implementation of Farm to Market Road Projects”
• DSWD – OSEC Special Provision No. 3, “Conditional Cash Transfer Program,” wherein savings by third quarter of 2011 may now be used to other programs and projects other than basic education, maternal health care and immunization;
• DepEd – OSEC Special Provision No. 16, “Government Assistance to Students and Teachers in Private Education”;
• DSWD – OSEC Special Provision No. 2 on the CCT program, stressing that it is not an anti-insurgency
program;
• General Provisions, Sec. 43, “Authorized Deductions”;
• DSWD – OSEC Special Provision no. 1, “Proceeds from Sale of the Welfareville property”;
• OEO – PDEA Special Provision no. 2, “Hazard Duty Pay”;
• Budgetary Support to Government Corps. Special Provision no. 7, “DAP Training Program”;
• PDAF Special Provision No. 1, “Use of Funds”;
• Unprogrammed Fund, Special Provision No. 5, “ Share of the City of Baguio in the Gross Income Taxes paid by all Locators Doing Business at the Loakan Economic Zone”;
• Budgets of Department of Energy – Attached Corporations – National Power Corp., Special Provision No. 1, “Budget Flexibility,” stating the entitlement to benefits of employees separated from service as the payment ought to be included in their submitted Corporate Operating Budget.

In an ambush interview following the signing of the 2011 national budget, Department of Budget and Management (DBM) Secretary Florencio Abad disclosed that there was no appropriation item that was vetoed by the President.

But, he admitted that 26 items in the budget were subject to a “conditional implementation,” which, he said, is a clarification on how they should be implemented.

“We also have general observations on certain portions of the budget which was really expressing the Executive’s view on some provisions which may later on be subject to clarification or controversy - hopefully not,” Abad said.

According to the DBM chief, among those subjected to direct veto was the provision limiting the ability of the Executive to enter into debt agreement.

“The present national debt obligation as percentage of the GDP (gross domestic product) is already at the level of about 57 percent so pegging or limiting the ability of government to borrow at 55 percent, realistically speaking, is not possible,” Abad explained.

“Of course, we want to maintain the flexibility of the government in its liability management program to take advantage of the positive environment where you have a strong Peso, weak Dollar, low interest rate so we can shift the profile of our liabilities to more Peso denominated debt to shield it from the volatility of the international foreign exchange market,” he said.

“Other items that were vetoed more or less fall into the category of the exclusive domain of the Executive,” Abad said. “We want to make sure that… later on we will not have problems with the implementation of those provisions because of possible conflicting jurisdictions between the Executive and the Legislature so we felt that it was necessary to veto them. Basically, most of the items vetoed fell along that general category.”

Senate Finance committee chief Sen. Franklin Drilon, meanwhile, stood firm on his call for the public to give President a chance to demonstrate that his spending policies are worthwhile.

Should the Aquino administration fail to prove the efficacy of his first national expenditure program (NEP), Drilon warned the Senate will be “less sympathetic” the next time they tackle the administration’s budget plans.

Drilon vowed to support the P 21.1-billion budget of the DSWD for the controversial CCT program which has been touted as the Aquino government’s “reform budget.” The CCT program is a direct cash grant of the Aquino administration for next year and seeks to cover 2.3 million household beneficiaries or half of the estimated 4.6 million poor families living below the poverty line.

A scheme initiated by the Arroyo administration, it targets each identified family with a stipulated amount of cash, subject to conditions such as sustaining children’s education, regular health check-ups and vaccines for 0-5 years old, among others.

Eastern Samar Rep. Ben Evardone, on the other hand, said the approval of the 2011 would even make more the Philippines an attractive investment niche to both local and foreign investors.

“The timely approval of budget will further bolster investor confidence as it signals a more stable economic environment,” he said in a text message to Manila Bulletin.

President Aquino inked yesterday the Congress-approved spending bill. The Chief Executive did not have a hard time convincing both the Senate and the House of Representatives to adopt most of the provisions of the Executive’s budget bill since the Congress has been dominated by his allies.

Madel Sabater, Manila Bulletin