16 October 2009
Debt & Public Finance
– Desperate times call for drastic measures.
Instead of relying on usual remedies like new borrowings to finance the relief and rehabilitation efforts and the reconstruction of public structures damaged or destroyed by Ketsana (Ondoy) and Parma (Pepeng), the government should firmly and unilaterally call for a debt moratorium, and sternly seek reparations from developed countries’ governments and international financial institutions like the World Bank (WB) and the Asian Development Bank (ADB) for the current climate crisis.
These were the demands made by the Freedom from Debt Coalition as Congress approved Wednesday the P12-billion supplemental budget for the emergency relief and rehabilitation efforts and as the government shifted the purpose of the P50-billion bonds from funding the Economic Resiliency Program to reconstruction of public infrastructures. The US$1.1-billion bonds will be offered by the state-run National Development Company (NDC) next week.
“This is the time for bold measures,” stressed Lidy Nacpil, FDC vice president. “Relying again on usual measures such as floating bonds would sink the country deeper into the debt and deficit spiral.”
“While financing mechanisms should immediately be pursued to provide immediate relief and rehabilitation, it must not be at the expense of bloating the national government debt and our fiscal deficit—all of which shall be borne eventually by the people including the typhoon victims. It would be a case of victimizing the already victims,” she said.
FDC raised the same sentiment on the P12-billion supplementary budget which will be sourced out from different quarters such as the 2009 General Appropriations Act’s unprogrammed funds.
“The mere fact that unprogrammed funds are ‘unprogrammed’ means that their sources of financing are dependent on available savings or other extra revenues. Since we have none, this would only become a license for the government to incur additional borrowings,” Nacpil said.Debt moratorium
“Instead of tapping new borrowings, the government must freeze external debt payments and re-channel freed up funds to finance government’s relief, rehabilitation and reconstruction programs. More than ever, the recent catastrophe must become an occasion for the country to renege from paying external debts many of which are challenged as illegitimate.”
FDC said the moratorium should be until an official comprehensive investigation and audit of all public debt and contingent liabilities is completed while “unbendable” policies such as the Automatic Debt Servicing Provision of the Revised Administrative Code of 1987 which perpetuate our debt problem is overhauled.
The group also said there should be no interest accruing on debts during the moratorium period. It said accumulated principal payments of these debts should not be paid immediately after the moratorium but should be spread out over time.
It was reported that total external debt payment in the proposed P1.541 trillion 2010 budget is P253.459 billion, more than enough money says FDC, to fund any national rehabilitation and reconstruction program.Reparations
The group is also demanding the Arroyo government to seek reparations from developed countries’ governments and international financial institutions like the World Bank (WB) and the Asian Development Bank (ADB) for the current climate crisis.
FDC said developed countries, transnational corporations and financial institutions must own up to their historical responsibility for their plunder and extraction of developing countries’ resources and minerals as well as for funding technologies and industries that exacerbate the climate crisis.
According to Nacpil, the World Bank and ADB have been funding fossil fuel projects for many decades with investments amounting to $51.4 billion and $7.3 billion, respectively, in Asia alone.
“As such, instead of begging for assistance and aid, instead of acting like beggars and helpless victims, we should be demanding reparations and just compensation for the climate crisis they largely contributed in the first place,” Nacpil concluded. -30-