We, from the Freedom from Debt Coalition (FDC), welcome the P35-billion cut in debt servicing from the proposed P1.415-trillion 2009 National Government Budget, which both Houses of Congress recently ratified.

However, even as we are not begrudging in giving praise where it should be duly given, we are equally forthcoming with our criticisms and concerns on the said budget measure.

On democracy and transparency of the budget process

The lack of transparency and the apparent secrecy of the congressional bicameral conference committee in dealing the 2009 budget are very disappointing at the very least. The failure of the bicam committee to divulge the specifics of the amendments it made in the budget to the public before ratification raised not only suspicion and speculation, it also contributed in aggravating the already huge democratic deficit in our budget process, and perpetuated, in fact, the fiscal dictatorship reigning over the planning and management of the people’s resources.

Obviously, the satisfaction of a responsible scrutiny was not accordingly given and the supposed check-and-balance mechanisms were greatly ignored. Literally, the amendments and in fact the very future of the 2009 budget rested on the hands of a few legislators, who should have practiced more democracy and transparency.

On the economic stimulus fund

We express caution on the P50.6-billion economic stimulus fund largely sourced from debt cuts specifically the hazy details of where the said funds would be used. We believe that unless the specifics of the economic stimulus fund are divulged, the implementing agencies are identified, and unless a clear and impartial monitoring mechanism has been placed, the danger that the fund might instead stimulate the already obese pork barrel allocations and the electoral campaign funds of certain legislators is real.

We assert that economic reforms must not be sacrificed in the altar of political patronage. It must not be a dismal choice between economic demise and corruption. We can avoid both through strong oversight and transparency mechanisms as well as through the direct participation of the people in the monitoring of the budget’s execution phase.

Moreover, a bigger and a more comprehensive economic stimulus package sourced from a blanket moratorium on external debt payments amounting to P200 billion could have been realized in order to respond better to the global economic crisis.

On the debt cuts

The P35-billion reduction in debt payments is a step in the right direction in freeing our people and their resources from the burden of paying debts, many of which are being challenged as illegitimate.

However, the debt cuts as it is in the budget are not enough. We maintain that unless the specifics of the debt cuts have become transparent such as prioritizing debts identified as fraudulent, wasteful and useless, and unless legislative work on the budget touches the debt-creating laws such as the automatic debt servicing provision as provided by the Revised Administrative Code of 1987, the debt reductions in the 2009 budget will become "illusory" and can only result to more debts due to the "deficit spending trick" by Malacañang.

We warn that unless the debt problem is addressed strategically, the debt cuts, no matter how big, sincere and meaningful would only give leeway to a powerful President wielding unchecked fiscal powers who can still pay for the debts by virtue of the automatic debt servicing provision or “perform a deficit spending scheme" in order to fund the stimulus. This will result to more borrowings and debts, or a refusal to fund it at all.

Clearly, as the economic stimulus fund would be funded by the reduction in debt payments grows, the expected deficit also grows. Without a strategic response to the debt burden, debt cuts won in the 2009 budget would become unreal. Simply put, the legislative practice of reducing debt service without the accompanying repeal of the automatic appropriation provision for debt service may be used as a means to increase pork barrel allocations in exchange for more debts.

Challenges and Strategic Recommendations

Therefore,  the task of democratizing the budget process, of reclaiming Congress’ power of the purse, and of freeing it from the burden of automatic debt servicing must begin with the institutionalization of necessary reforms to change the current debt and public finance system.

Thus, we in FDC call for the following:
• Amendment of the Revised Administrative Code of 1987 as instituted by Executive Order 292 so as to remove automatic debt servicing (Section 26 B) and the executive powers of impoundment (Section 38) and realignment of savings (Section 39).  

• Amendment of the Foreign Borrowings Act of 1966 (as amended by PD 1939) and the Official Development Act of 1996 to place more Congressional limits and parameters on the unilateral contracting of loans,

• Legislation of parameters for the line-veto and reenactment.

• Passage of House Joint Resolution No. 4 mandating Congress to create a Congressional Debt Commission which will audit all public debt and contingent liabilities.

• Institutionalization of grassroots people's participation and involvement in all stages and levels of budget development to ensure transparency, accountability and budget responsiveness to people’s needs.

These are the challenges our lawmakers must address after the ratification of the 2009 National Government Budget. We remind them that unless the fiscal powers of the President is regulated and unless the institutional mechanisms that provide for automatic debt servicing is rescinded, any meaningful reform concerning debt reduction as well as the alternative reallocation of state resources in the budget will always be susceptible to political machinations.

As such, FDC challenges the 14th Congress to dismantle all the impediments resulting in a scarcity of democracy in the budget process, the diminution of Congress’ constitutional power of the purse and to fundamentally resolve the country’s debt problem. -30-

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