28 February 2012
Debt & Public Finance
– The news suggesting that “the Philippines has now become a creditor nation” may sound good, but the Freedom from Debt Coalition (FDC) smells something fishy about this “hype.”
Since last week, news reports and Op-Ed pieces have come out and called it “a reversal of fortunes for the Philippines.” Malacañang has hailed it as proof of the international community’s strong confidence for the country’s financial system.
According to the announcement of the Bangko Sentral ng Pilipinas (BSP), the country has made available to the International Monetary Fund’s Financial Transaction Plan (FTP) a currency exchange arrangement of SDR163.8 million (US$251.5 million). More than half of these funds were disbursed by the IMF to European countries such as Ireland, Portugal and Greece to address the financial crisis now shaking the Euro economic zone.
Ricardo Reyes, FDC president, said that while such move “seems to suggest that the Philippines has gotten out of its debt problem, which of course is not true,” considering the outstanding national government debt of P4.93 trillion at present, the catch lies in the next part of the BSP announcement, which he said “smells fishy.”
According to the announcement, the country’s “continued participation in the FTP will pave the way for the BSP’s admission in the New Arrangement to Borrow (NAB) facility of the IMF.”
“BSP lends a part of our dollar reserves to IMF’s FTP so the Philippines can borrow again and borrow more from the IMF!” Reyes stressed.
It is recalled that six years ago, under Pres. Gloria Arroyo, the BSP prepaid all outstanding Philippine debts to the IMF. However, this did not result in a decrease of the country’s debt, according to the debt watchdog.
FDC said that while it is true that debt service under Arroyo’s time was highest among post-EDSA administrations (P598.99 billion annual average), “we have also witnessed the highest gross borrowing under her term (P536.08 billion annual average).”
“Moreover, our debt stock did not decrease but instead doubled,” Reyes added.
From the P2.38 trillion during her first year in 2001, the national government outstanding debt catapulted to P4.72 trillion at the end of Arroyo’s term in 2010.
“We have suffered more than enough and continue to suffer as a consequence of IMF’s debt trap. Together with the World Bank, the IMF imposed structural adjustment programs (SAPs) on close to 90 developing countries, including the Philippines, beginning 1980. The elements of these SAPs include long-term structural reforms to deregulate the economy, liberalize trade and investment, and privatize state enterprises, coupled with measures like cutbacks in government expenditures, high interest rates, and currency devaluation. The two international financial institutions sought nothing less than the dismantling of the developmental policies of state-assisted capitalism that they judged to be the main obstacles to sustained growth and development,” explained Reyes.
“Through their macroeconomic intervention policies tied with their loans and ‘aid’, they have done irreparable damage to our domestic economy. Until now, we still suffer the effects of the privatization, deregulation, liberalization and public spending cuts imposed upon us. Why go back to the clutches of this blood sucker?” said Reyes. -30-