Asia

Paying debt ‘honorable thing’ to do

Gil C. Cabacungan Jr., Juliet Labog-Javellana
Philippine Daily Inquirer
August 26, 2005

Despite the twin threats of eroding fiscal stability and surging oil prices, the government will religiously pay its debts because it is the “honorable thing” to do.

“We must pay our past and present obligations. Otherwise, we will face severe economic sanctions that will only ruin the Philippine economy,” Press Secretary Ignacio Bunye said at a briefing yesterday.

The outstanding public sector debt amounted to P5.3 trillion as of December last year.

Malaca—Åang is proposing a total of P721.7 billion in debt payments for next year, consisting of P340 billion in interest payments and P381 billion in principal amortization.

Interest payments, up 12 percent from this year’s allocation, already account for a third of the proposed budget of P1.05 trillion for 2006.

Bunye said the Arroyo administration had little to do with the country’s debts because these were “acquired from a chain of borrowings dating back to past administrations.”

Joker Arroyo holds a different view. Last year, the senator said “the borrowings of the three-year Arroyo administration are bigger than the combined borrowings of the (Fidel) Ramos and Erap (Joseph Estrada) administrations for eight years.”

Behest loans

A significant part of the country’s debts are behest loans the Marcos regime granted to its cronies. These loans, which were later assumed by the government, are still being serviced by taxpayers.

There have been mounting calls for the government to seek debt relief from creditors over the past few years but the administration has brushed these suggestions aside.

Saying P931 million a day for interest payments was too much, Senator Miriam Defensor-Santiago said she would ask the Senate to limit debt servicing in the 2006 national budget to levels that would match the growth of the Philippine economy.

“It appears that . . . we have already repaid twice our external debt. Further, we have paid our foreign creditors five times more in debt service than we have received as official development aid,” Santiago said.

Reduce debt service

Santiago said that in the budget deliberations, the government should try to avoid the terms imposed by the International Monetary Fund and deal directly with its creditors.

“We should support an international program to reduce debt service by 75 percent and to reduce the debt capital also by 75 percent. The Senate should even discuss the possibility of canceling one-third of the nonconcessional debt, as well as the long-term rescheduling of concessional loans,” she said.

Senator Manuel Villar, chair of the Senate finance committee, reiterated his call for the government to reduce its massive debts and seek debt relief.

He said international creditors would be the main beneficiaries of the national budget next year.

“Debt servicing continues to corner the bulk of the country’s yearly budget and revenues, to the detriment of allotment for social services. The health, education and social welfare sectors have to take a back seat to interest payments. This vicious cycle has got to stop once and for all,” Villar said.

Cancel odious debts

He has filed Senate Bill No. 128 seeking to create a council for debt relief to review bilateral and multilateral loan agreements and treaties entered into by the government. The bill also seeks the cancellation of odious debts and restructuring of debts for easy payments.

Senator Ralph Recto, chair of the Senate ways and means committee, said interest payments alone would likely exceed the P1-billion mark next year.

Senator Mar Roxas, chair of the Senate committee on economic affairs, said the Senate would make a “very detailed examination” of the proposed budget.

Roxas noted that the proposed budget had a deficit target of P150 billion.

The Department of Finance has warned the government would likely miss its target of an extra P15 billion this year from higher taxes on tobacco and alcohol products, following weak first-half revenues from cigarettes.

Bit carrot

In the House of Representatives, Anakpawis Rep. Crispin Beltran said the budget talks should be deferred until President Gloria Macapagal-Arroyo was replaced.

Beltran said there was no point talking about the 2006 budget when there could be a new and different administration next year.

“This is yet another budget program that’s severely twisted, seeing that like its predecessors it prioritizes foreign debt servicing and intelligence.

“The insensitivity of this administration is appalling. The times call for radical restructuring of the budget, to have it directed toward expenditures that will concretely and directly give aid to Filipinos and their ailing families. Public housing, education and health are sure to get the short end of the stick again,” he said.

Beltran said he believed that the proposed budget would be used like a very big carrot to woo officials and dissuade them from abandoning Ms Arroyo.

With a report from Michael Lim Ubac

Categories: Asia, Odious Debts, Philippines

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