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)

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RP allots P681.5 B for debt service next year

Posted in Debt Service, dof, Sovereign Debts by Erineus on April 20, 2009

By Iris C. Gonzales Updated September 03, 2008 12:00 AM

The government has programmed to spend P681.516 billion for debt service payments in 2009, 7.1 percent higher than this year’s allotment of P636.075 billion, the Bureau of the Treasury (BTr) reported yesterday.

Of the amount, the government plans to spend P482.138 billion for domestic debts and P200.378 billion for foreign loans.

The P482.138-billion debt service allocation for domestic obligations covers payments for principal amortization, amounting to P290.031 billion and interest payments, amounting to P191.107 billion.

On the other hand, the P200.378-billion debt service allocation for foreign loans covers payments for principal amortization amounting to P88.835 billion and interest payments of P111.543 billion.

Next year’s debt service allocation is P45.441 billion higher than this year’s payments amounting to P636.075 billion.

This amount comprises of payments for domestic obligations (P448.357 billion) and payments for foreign loans (P187.718 billion), data further showed.

The P448.357-billion debt service allocation for domestic obligations covers principal amortization amounting to P264.667 billion and interest payments of P81.305 billion.

On the other hand, the P187.718-billion debt service allocation for foreign loans covers principal amortization (P81.305 billion) and interest payments (P106.413 billion).

The government has been trying to reduce its debt service payments to have more funds for the more necessary expenditures such as infrastructure and social services spending.

However, fiscal authorities have decided to postpone the government’s fiscal consolidation program due to the difficult global economic tide this year. As such, the government expects to incur a deficit of P75 billion this year as it has already postponed its balanced budget goal to 2010.

For 2009, the government is looking at incurring a deficit of P40 billion. The government is seeking a budget of the P1.415 trillion for 2009, which is premised on revenues of P1.393 trillion.
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Government urged to revise budget allocation for debt servicing

Posted in Budget, Debt Policy, Debt Service, dof, Sovereign Debts by Erineus on April 20, 2009

By Ma. Elisa P. Osorio Updated December 30, 2008 12:00 AM

The Free Trade Alliance (FTA) is urging the government to revise its policy on the payment of foreign debt and instead use the money for projects that would create jobs for Filipinos especially the overseas Filipino workers who are expected to be displaced because of the global recession.

“We also demand that the government immediately put a halt to the senseless automatic appropriation of two-thirds of the national budget for debt servicing,” the FTA.

“We should instead adopt the Argentinian budgeting system, which makes allocation for debt servicing only after urgent adequate allocations have been made for urgent and priority social spending,” the group said.

In a resolution signed during the recently concluded national forum on “Bailing out the Philippine Economy” the FTA said the country, like other nations, need a stimulus package in order to help pump prime the economy.

The government must increase its spending especially on infrastructure and job creation projects in order to spur the economy.

“The Philippines need a large stimulus package directed at the domestic market to preserve and create millions of jobs,” the group said.

“The government should be able to spend as much as it can on productivity-raising infrastructures such as school buildings, renewable energy, communal irrigation projects, farm-to-market roads, harvest silos, barangay health clinics, public transport systems and so on,” FTA said.

Likewise, the FTA said the government must re-think its policy of opening up the local market to imported products.

Earlier the government removed the duty for the importation of certain products like cement.

FTA said this is not the time to allow cheaper products to enter the country. Instead, the government must help protect local industries in order to keep local jobs.

“We urge our government and policy makers to immediately put in place the much-needed safety nets for our working people, including our industrialists and entrepreneurs. One effective safety net, to preserve jobs and industry, is to adjust our industrial and agricultural tariffs toward our maximum bound tariff commitments to the WTO (World Trade Organization),” the group said.