08 July 2009
Debt & Public Finance
- Members of the Freedom from Debt Coalition (FDC) staged a protest action in front of the World Bank office here today to demand the total and unconditional cancellation of all debts it is claiming from the Philippines and developing nations. The protest action coincided with the opening of the Group of Eight Nations’ (G8) 35th Summit in Italy which sets among its agenda the development of a comprehensive response to the global economic crisis.
In a statement, FDC Vice President Lidy Nacpil said the longstanding demand of the peoples of the south for debt cancellation is the best economic stimulus program developing nations can use to address the crisis.
“For this reason, we chose the World Bank office as the venue of our protest action as it is one of the most prominent international financial institutions financed by G8 governments,” Nacpil said.
Nacpil who is also the regional coordinator of Jubilee South-Asia Pacific Movement on Debt and Development (JS-APMDD) said the G8 through its governments, commercial banks and international financial institutions like the World Bank have saddled many developing nations to a life of forced indebtedness.
She said as of 2007, the total external debt stock of all developing countries amounted to $3.360 trillion. The said debt stock consists of multilateral, bilateral and commercial loans as well as bonds and securities claimed by northern governments, commercial banks and international financial institutions many of which are controlled by the G8.
“The Philippines is all too familiar with this story,” Nacpil said.
Citing government data, she said as of March 2009, the national government’s total debt stock is P4.229 trillion with $2.54 billion or P122 billion being claimed by the International Bank for Reconstruction and Development (IBRD) also known as the World Bank. Nacpil said the Bank is 45.67% controlled by the G8 countries with Japan and the United States having 16.38% and 7.86% voting powers, respectively.
“For this year, the government is scheduled to allot $299 million or P14.15 billion to World Bank for interest payments alone,” Nacpil said.
“Instead of prioritizing World Bank debts many of which are challenged as illegitimate, our resources should instead be used to augment spending on social services, funding of strategic state development projects, financing of programs to strengthen our domestic economy and generate more jobs especially in this time of a worldwide economic crisis,” Nacpil said.
FDC said illegitimate debts are debts and/or “obligations” pushed by lending countries and institutions to developing nations which have largely funded flawed development projects and programs; debts incurred by illegitimate regimes and/or loans which have been the result of questionable, undemocratic, illegitimate means in order to perpetuate unequal economic and political domination.
The anti-debt watchdog said in the 2008 and 2009 national government budgets, the $100 million Second Social Expenditure Management Program (SEMP2) and the $121.8 million Small Coconut Farms Development Project (SCFDP) were some of the illegitimate World Bank loans identified by Congress and FDC as illegitimate.
It was reported that SEMP2 was intended to procure 17.5 million Social Studies textbooks and teachers' manuals for public elementary and high schools. However, the project allegedly underwent a rigged bidding process involving a monopoly and was reported to have produced at least 600,000 defective textbooks.
On the other hand, SCFDP, which was exposed by FDC as “the original fertilizer scam,” was a World Bank credit facility loan agreement entered by the Philippine government on June 4, 1990. An estimated 40% of the funds intended for the project’s fertilizer deliveries had reportedly been malversed, with the Commission on Audit (COA) raising questions concerning insufficient documentation pertaining to the distribution of fertilizers.
“There is no more reason for the country to pay for these debts. A large part of these debts have contributed to our impoverishment, aggravated the impacts of the economic crisis, and makes recovery from the crisis extremely difficult and complicated.” Nacpil said.
In a letter handed over to the World Bank, FDC and JS-APMDD demanded the following:
1. Total and unconditional cancellation of all illegitimate debts claimed by the World Bank from the people of the south.
2. Discontinuation of World Bank financing of projects and policies that contribute to climate change.
3. Respect of south countries’ right to reverse harmful policies such as privatization of public utilities, liberalization of trade and deregulation as assertion of national sovereignty.
4. End the practice of using loans and debt cancellation to impose conditionalities.
5. Restitution and reparations for the ecological and climate debts owed by the World Bank to peoples of the South
6. End support for the illegitimate leadership and government of Gloria Macapagal Arroyo.
According to FDC, as of 2007, out of the top six foreign bilateral outstanding debts claimed from the Philippine national government, four are loans from members of the G8, namely Japan (US$5.3 billion, Top 1), United States (US$354 million, Top 2), France (US$115 billion, Top 4), and Canada (US$60 billion, Top 6).
The multilateral debts claimed from the Philippines include US$2.93 billion loans from the Asian Development Bank (ADB). The ADB is controlled by seven of the G8 countries (except Russia) representing 39.6% of voting rights, with Japan and the United States having the largest stake at 12.756% voting power each.
As for commercial loans, loans from the Deutsche Bank of Germany, another G8 member, tops the list, at US$347 million. -30-