After revealing that the Aquino administration incurred a record P4.16-trillion debt in just five years, the Freedom from Debt Coalition (FDC) is now demanding that the government make a public accounting on how it used the borrowings to improve the lives of the Filipino people.
“A detailed explanation by the government is long overdue on how the loans were contracted, where they went, how they were used and what became of the programs and projects on which they were supposedly spent,” the FDC said.
Earlier, Finance Secretary Cesar V. Purisima, seeking to rebut the budget and debt watchdog for claiming that the President has become the biggest loan addict among Philippine chief executives, said the current administration has been very active in the international capital market as part of its liability-management program, enabling it to lengthen debt maturities at lower cost.
“Aquino not only failed to curb the country’s poverty and debt burden; he also turned out to be the biggest loan addict, ad was a total failure in addressing the Philippines’s entrapment in a cycle of debt dependence,” the FDC had said.
Former Budget Secretary Benjamin Diokno expressed surprise over the administration’s penchant for borrowing.
“We have enough money internally to finance all our requirements and we have enough money to pay for our debt. It is not advisable to borrow money from abroad,” he said.
Diokno, now an economics professor at the University of the Philippines, also noted that the country’s current gross international reserves (GIR) were not only “healthy and hefty” but that “we are assured of a steady inflow of $25-billion to $26-billion overseas remittances yearly,” not to mention the “growing inflows from expanding business-process outsourcing (BPO) industry.”
On Feb. 18, the government again borrowed $2 billion in 25-year US dollar-denominated global bonds, with an interest rate of 3.7 percent, the lowest coupon ever issued by the country to date.
In trying to explain the borrowings, the government said it has been using these to retire debts while taking advantage of the low interest rates as a result of the series of credit-rating upgrades the country has obtained.
The most recent borrowing, however, will have $ 1.5 billion to be used to pay existing bonds under a buy-back offer while the balance will go to plugging the budget deficit.
The FDC, unconvinced of the recent pronouncements of Malacañang, challenged the Aquino administration to “immediately take steps” to repeal the Automatic Appropriations Law (AAL) for debt servicing, which was enacted through Presidential Decree 1177 issued way back in 1977 during the martial law years of President Ferdinand E. Marcos and perpetuated by the 1987 Revised Administrative Code.
“This Marcosian law has been a major concern, as the Philippines remains the only country in the world with such a rider in its government budget, said Ed Tadem, FDC president. “From the borrowings of Marcos to Aquino, the Philippine debt urgently deserves closer scrutiny and critique, especially since many of the dictator’s debts have been paid along with fraudulent loans of successive administrations.”
FDC explained that with the government’s claim of “sound” borrowings and liability management strategy, it has no more need to assure lenders that it would automatically appropriate payments for debt service first before it divides whatever remains of the budget pie among social and economic services.
FDC said automatic appropriations for debt servicing has long undermined a democratic budget process and the people’s power of the purse, from Marcos’s time until the present administration.
“Aquino has the obligation to explain to the Filipino people why an average of 48.2 percent of the government’s yearly borrowings from 2011 to 2015 automatically went to the amortization of existing debts, while an annual average of 15.6 percent of the national budget was allocated first to interest payments before appropriations were made for programs, projects and activities, FDC said.
FDC also said Aquino will also leave his successor with P6.4 trillion in national government debt, P4.16 trillion of which was borrowed during his term. This translates to a debt of P66,486.26 for each of the estimated 103 million Filipinos this year, including government-guaranteed liabilities, FDC said.
Purisima, disputing FDC, said that, “using nominal figures to talk about debt is as misguided as it is disingenuously detrimental to the quality of public discourse on public finance.”
The focus when talking about debt is sustainability “or the ability to pay back the borrowed money, thus, the important measurement is debt as a percentage of GDP (gross domestic product),” he said.
“During the Aquino administration, fiscal consolidation has led to a well-managed deficit, which eased financing requirements, translating to lower growth in national government liabilities compared with the size of the economy,” he said.
Purisima said that of the end of last year, the country posted a debt-to-gross domestic product (GDP) ratio of 44.8 percent, the lowest since 1996.
“In fact, for the first time since the early 1980s, the debt-to-GDP ratio fell below 50.0 percent in 2013, a far cry from the year 2004, when the ratio was at a high of 74.4 percent,” he said.
Purisima said that in comparison, the debt-to-GDP ratio of the US stood at 96.1 percent in 2013, 196 percent for Japan in 2012 and 55.1 percent as of 2012 for Germany.
Purisima said that if the country’s liabilities included those of social-security institutions and local government units (LGUs), the proportion of the liabilities of the government to the country’s total output would be 36.4 percent in 2014, lower compared to the 44.3 percent in 2009 and lowest since earliest comparable data in 1998.
Including liabilities of government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs), the Outstanding Public Sector Debt as of end-September 2015 stood at 55.8 percent, the lowest since the earliest comparable period or in 1998, the finance secretary said. “This is a 15.1-percentage point improvement from the 70.9 percent posted in 2009, and is worlds apart from when it was at its peak in 2003, at 111.6 percent.”
Purisima said the government’s budget is not only being used for current programs but future programs and potential growth of the economy.
“Relying solely on the current level of revenue generation to finance the budget creates a dangerous restraint to growth, is uncommon (there are only five countries in the world without debt), and ultimately unwise for most. This provides the impetus for maintaining a sustainable growth,” Purisima said.
source: Luis Leoncio / marketmonitor.com.ph