12 December 2008
Debt & Public Finance
– The Senate’s move to include a P30-50 billion stimulus package to bankroll “extra spending” for important government expenditures by realigning portions of debt service and lump-sum allocations in the proposed 1.415 trillion 2009 National Government budget got the backing of an advocacy group working on debt and development.
The Freedom from Debt Coalition (FDC) in a statement said it lauds the bold move by Senate to cut service allocations in favor of increased social spending and the creation of a socio-economic stimulus package especially during a prolonged and grueling economic crisis.
The group said Senate’s initiative to cut debt payments is already an initial victory for the Filipino people who are carrying the heavy burden of paying for debts many of which are challenged as illegitimate.
FDC has been pushing for debt reductions as well as other budget reforms. Repeal of automatic debt service law a must
However, the debt watchdog cautioned lawmakers into treating the initiative as a “be all, end all solution.”
“While we believe Senate’s move is a step in the right direction, without pairing the said initiative with immediate institutional reforms such as rescinding debt-creating laws, the debt cuts and the stimulus package would in the long run only provoke a rapid increase in the government’s deficit which in turn will lead to more borrowings, ” FDC Secretary General Milo Tanchuling said.
“The repeal of the automatic debt servicing provision remains as an important initial step of all sincere legislators who want to free the people from paying illegitimate and burdensome debts,” Tanchuling said.
FDC has been calling for the overhaul the Revised Administrative Code of 1987 as instituted by Executive Order 292, which includes the removal of the automatic appropriations for debt service (Section 31.B.) and the presidential powers of impoundment (Section 38) and realignment of savings (Section 39).
The group is also calling for the 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, pending a more favorable condition for a constitutional amendment modifying this presidential power (Article VII, Section 20).More debt cuts needed
Tanchuling said Senate should also consider in looking into more loan agreements that are challenged as fraudulent, wasteful and/or useless.
In its position paper submitted to the Senate’s Committee on Finance, FDC proposed a suspension of debt interest payments worth $95.52 million or P4.59 billion from 42 loan items for 23 projects/programs challenged as fraudulent, wasteful and/or or useless.
“In fact, we are calling for a moratorium of P200-billion worth of foreign debt service in order to boost spending on social and economic services that will contribute in shielding the Philippines from the global fallout,” Tanchuling said.
“An immediate moratorium of external debts and its reallocation to boost government spending is one of the best ways to ensure a crisis-respondent budget in 2009,” he stressed. Budget oversight
In the context of “ballooning illegitimate debts,” FDC lauded Senator Edgardo Angara for following the move of the lower house to create a budget oversight committee to monitor expenditures for the 2009 budget.
“This should have done much earlier, but we are nonetheless glad that such initiative was passed by a legislature which seems to shy away from checking over the expenses of the executive,” FDC said.
FDC however reiterated that the oversight committee should be actively participated by members from the civil society and individual citizens, warning of a “possible collusion between the executive and the unscrupulous members of the legislative oversight committee should there be no ‘third party’ to check them both.”
“It is not enough, though that we focus only on the present and future government expenses. A retroactive oversight and omnibus review is also necessary in order to establish the accountability and responsibility of those who may have malversed the people’s money,” FDC added.Debt audit as a necessary step
Thus, FDC challenged the government to follow the steps of Ecuador and Brazil, and to conduct an Official Debt Audit which will evaluate and dissect loan agreements, debts and other “obligations” challenged as illegitimate, adding that the government “seems to have been laggard in reviewing its own books.”
Recently, the Ecuadorian government’s debt audit commission said it uncovered “illegality and illegitimacy” in the country's foreign obligations, findings that may give President Rafael Correa the legal basis he's sought to halt bond payments.
In Brazil, the President of the Chamber of Deputies, Arlindo Chinaglia, last week signed the Act creating a "Parliamentary Commission of Inquiry aimed at investigating the public debt of the federal, state, and municipal governments, the payment of interest on the same, the beneficiaries of these payments and their monumental impact on the social policies and sustainable development of the country.” -30-