Wake Up, Philippines!

Ong: Illegitimate debts and the economy (1)

Posted in Debt Policy, debt problem, Debt Service, Sovereign Debts by Erineus on May 21, 2009

By Ted Aldwin Ong
Saturday, September 08, 2007

I FIND some sense in the statements of Albay Representative Edcel Lagman, chairman of the House Appropriations Committee, when he said that “”If we want to sustain and enhance the economic gains we have achieved and ensure that our people will truly reap the benefits of economic growth, we have to first resolve the twin problems of a ballooning population and huge debt service.”

Debt servicing has been eating almost 50 percent of national budget through automatic appropriations. The Arroyo regime is considered the run away winner as far as debt accumulation is concerned in financing its government among post 1986 EDSA administrations The Arroyo is also the record holder in terms of debt payments. In such a short period of time Mrs. Arroyo has borrowed a total of P2.82 trillion in while paying a total of P2.83 trillion.

While Representative Lagman expressed a significant point on the impact of debt servicing to economic growth, it needs to take an important step by looking into the legitimacy or illegitimacy of government debts especially the contracts entered by the Arroyo regime.

It is undeniable that the national government has entered into numerous projects which proved to be disadvantageous to the Filipino people. At the end, it is the people – the taxpayers, who bare the responsibility of paying anomalous projects. Ultimately, it is also the people who suffer the lack of appropriations for social services because debt servicing automatically absorb a big chunk of the national budget.

Let us look into the concept of the illegitimacy of debt in order for us to fully understand why some projects are by nature illegitimate, thus it must not be paid by taxpayers.

Lidy Nacpil, coordinator of Jubilee South-Asia Pacific Movement on Debt and Development who is also the vice-president of the Freedom from Debt Coalition-Philippines, has thoroughly discussed the concept of illegitimate debts.

The concept of legitimacy is a broad concept that touches on the principles of human rights and sustainable human development, justice and fairness, accountability and responsibility, sovereignty of people’s and nations, democratic rights and processes.

Loans which violate these principles are deemed to be illegitimate – or unacceptable. This violation occurs in the elements necessary in the acquiring of the debt and its impact, which includes, illegitimate processes, illegitimate terms and contractual obligations, illegitimate purposes and illegitimate use of the funds, illegitimate origins, illegitimate impact of debt servicing and illegitimate practice of using debt, debt relief, and access to credit as leverage for imposing conditionalities.

So much of the word “illegitimate” but numerous projects fall under this concept and category like the Social Studies textbooks and teachers’ manuals for public elementary and high schools, the Austrian Medical waste Projects, the North Luzon Railways Project, the Small Coconut Farms Project and the Power Sector Restructuring Program. (To be continued)

(Comments to tao.kolumnista@gmail.com)

Gov’t local, foreign borrowings up 23.4%

Posted in debt problem, Sovereign Debts by Erineus on May 21, 2009

By Ronnel Domingo
Philippine Daily Inquirer
First Posted 00:18:00 05/21/2009

MANILA, Philippines—The government has reported a 23.4-percent increase in its borrowings in the first four months of the year, as expenditures rose due to economic pump-priming efforts.

Data from the Bureau of the Treasury showed that from January to April, the government borrowed P246.4 billion from here and abroad, higher than the P199.74 billion incurred in the same months in 2008.

As of end-April, the government has availed itself of P100.73 billion in foreign loans or 55.4 percent higher than the P39.44 billion contracted a year ago.

The increase was mainly due to the sale of $1.5 billion or P71.386 billion worth of global bonds in January, as well as the tapping of project loans from the Asian Development Bank, International Bank for Reconstruction and Development and the Japan Bank for International Cooperation.

Also, the government borrowed from domestic lenders P145.65 billion, which was 9 percent lower than the P160.23 billion contracted in the first four months last year.

The decrease was partly because of a debt swap implemented in January, which involved a total of P136.6 billion.

Conducted through the government’s debt consolidation program, the swap involved maturing five- and seven-year benchmark bonds that were traded for issues of the same tenors.

Further, the government paid in the first four months of the year a total of P62.56 billion of foreign loans and P135.46 billion of domestic obligations.

This brought the country’s end-April net borrowings to P48.36 billion or 332 percent higher than the P11.2 billion a year ago.

In April alone, the government borrowed P5.8 billion from foreign lenders, a decrease of 72 percent from P17.08 billion in the same month last year.

Borrowings from local lenders amounted to P26.62 billion or 11.9 percent lower than the P30.22 billion a year ago. This resulted in a net borrowing of P18.87 billion in April, a reversal of a net payment of P1.3 billion in the same month last year.