Debt watchdog warns vs. waiting for recession, calls for “Resiliency Plan Oversight”
03 June 2009
Debt & Public Finance
- The inflexibility of the government’s fiscal policies may eventually bring us to the much-feared recession scenario, the Freedom from Debt Coalition (FDC) today warned.
“At this point, what we need is pump-priming and increased spending, but we are inhibited to do so because of inflexible fiscal policies in place. We cannot spend where and when we want to, even if we need to,” FDC vice president Etta Rosales said.
The debt watchdog issued the statement in reaction to the recent report by National Statistical Coordination Board (NSCB) Secretary General Romulo Virola on the failure for the planned pump-priming to materialize amid 10-year low 0.4% first quarter economic growth.
“Foremost among these inflexible policies is the automatic appropriations on debt payments, which is the reason why 26.3% or P122.2 billion of government’s disbursement from January to April 2009 went to interest payments for debts alone. This, while other sectors of the economy are suffering from Mrs. [Gloria] Arroyo’s ‘spending compression’,” Rosales stated.
The automatic appropriations for debt payments, codified in Section 26(B) in the Book VI of the Executive Order 292, also known as the Revised Administrative Code of 1987, stipulates that “all expenditures for ... (b) principal and interest on public debt, ... are automatically appropriated.” FDC said this provision “greatly limits government’s policy instruments” in combating the crisis.
“Because the government cannot disburse its end of the P330 billion Economic Resiliency Plan (ERP), we are forced to rely on the private sector to disburse, which, as we know, are reluctant to bite into GSIS and SSS loan offers despite being covered by shamefully generous promises of sovereign guarantees” the former party-list representative said.
FDC then called for immediate Congressional action on House Bill 329 filed by administration ally and House Committee on Appropriations vice chair Edcel Lagman calling for the repeal of the automatic appropriations provision on debt service, and Senate Resolution 235 filed by Senator Pia Cayetano to revisit the said law.
“Surely, only government can and should mobilize funds at this point, else it might be too late. We should not let the 0.4% ‘growth’ dull us into non-vigilance” FDC cautions.Irreversible Damages
FDC then states that waiting for the two consecutive quarters of negative growth, which is the technical definition for recession, may make the situation “too late even for recovery.”
“At that time, we may be trying to fight off the negative effects of recession which would have been impossible to counteract,” FDC warned.
FDC said that despite the expected spike in election spending, “irreversible damages” on the industrial and employment base may severely compromise the country’s chance for economic survival.
“We are talking about here the failed industries and displaced workers. Without the government rescuing critical industries and preventing massive retrenchments, we may end up having a much smaller industrial base to serve as platform for future employment, and a portion of labor force which was rendered unable to return to work due to harsh social conditions,” FDC warned.
“We are already feeling the impact of the crisis. In the first quarter without tangible pump-priming, Capital Formation, Imports, and Exports fell by 5.7%, 19.2%, and 18.2% respectively, while Agriculture, Fishery and Forestry sector and the Industrial sector contracted by 1.0% and 6.6% respectively. Surely, the lack of government stimulus in these sectors didn't help very much,” FDC said, citing NSCB figures.Resiliency Plan Oversight
On the problem of unreleased economic stimulus, FDC proposed an “expanded and inclusive Economic Resiliency Plan Oversight Committee” composed of current cabinet members, legislators, and former government officials, and economic experts.
“Some politicians would want the administration to spend more to counter-act the effects of the crisis, others warn against using the stimulus as election kitty. We say that the process of disbursing and monitoring the so-called stimulus must be opened up to other government officials and the public,” FDC says.
Among the proposed members of the Resiliency Plan Oversight Committee the group suggested were:
• Members of the Development & Budget Coordination Committee (DBCC), which includes the current Secretaries of Finance and Budget, NEDA Chief, and the Bangko Sentral governor
• Chair of the Senate Committee on Finance and House of Representatives Committee on Appropriations
• Former and Current Governor Officials including Former Budget Secretary Benjamin Diokno, Former National Treasurer Leonor Briones, Former NEDA Chief Felipe Medalla, Former Budget Secretary Emilia Boncodin, Representative Walden Bello, and Presidential Adviser on the Economy and concurrently Albay Gov. Joey Salceda.
“The Oversight Committee should regularly report to the public about where, when, and how much of the ERP was already disbursed. Transparency and accountability must be built into place, together with sound economic and social sense,” FDC concluded. -30-