22 October 2007
The Freedom from Debt Coalition (FDC) today called on the National Power Corporation to fully disclose and audit the items and nature of its $2.1 billion debts to establish their legitimacy before prepaying them in the next 12 months.
“Before NPC prepays these debts, a full disclosure and a close scrutiny must be conducted first to determine their legitimacy. What if some of these loans are illegitimate—anomalous, fraudulent, unnecessary, onerous, lead to destruction of environment, and/or violated the basic principles such as human rights and sustainable development? Why do we have to prepay illegitimate debts?” asked FDC secretary-general Milo Tanchuling.
NPC tops the list of government-owned and controlled corporations (GOCCs) with huge debts. In 2004, two hundred billion pesos (P200 billion) NPC debts were transferred to the national government in accordance with the provision of the Electric Power Industry Reform Act which mandates the privatization and restructuring of the power industry.
“This debt audit is long overdue. The government should have done this prior to its assumption of the P200 billion NPC debts which resulted in the increase of the national government debt stock,” said Tanchuling.
“Prepaying the $2.1 billion debts of NPC without audit would only legitimize loans that may be illegitimate,” he stressed, adding that the disclosure of these NPC debts would determine if the people indeed benefited from these and if these were incurred in a clean, honest, and transparent process.
The debt watchdog pointed out that the government should not commit the same mistake it did in prepaying the Bataan Nuclear Power Plant (BNPP) – a white elephant project which people never had a glimpse of light from it, but was still paid for.
The government had paid since 1986 a total of P64.7 billion – P43.5 billion for principal amortization and P21.2 billion for interest – for the power plant. The BNPP was fully paid in advance this April because of the prepayment.
“Twice is too much and the government should not replay its multi-billion peso mistake in prepaying the BNPP,” said Tanchuling.
The prepayments of debts do not actually clear the government from indebtedness as there remains “successor debts” – debts incurred to repay past debts. This passes on the burden of paying for the illegitimate debts incurred in the past to the present and future generation of our people.
Power Sector Assets and Liabilities Management Corp. president Jose C. Ibazeta said it would be prepaying $1.3 billion of the $2.1 billion debts of NPC, the most expensive and critical portion, in the next 12 months to take advantage of the low interest rates and the strong peso.
Besides retiring or refinancing the NPC debts, PSALM is also looking into changing the currency of some debts to change the risk profile of the state-owned power firm. This means borrowing in the local currency to finance loans in foreign currencies.
“Changing the currency of these debts does not change its character. It would launder whatever fraud or irregularity that mired the loan or project’s procurement and usage,” FDC said.
FDC said that government should use the proceeds it is obtaining in other endeavors instead of prepaying illegitimate debts.
It noted that the NPC had announced earlier its plans of getting a $700 million loan for 2008 to finance its capital expenditures.
“Instead of engulfing into the get-debt-to-pay-debt cycle, what the government should do is use this proceeds to bankroll projects for the power industry like missionary electrification and the NPC’s capital expenditures,” it said.
FDC said the money could also be used to support basic social services that would truly benefit the people.
“As a former president of Tanzania said, ‘Do we starve our children to pay our debts?’ What is more important now is that we let the people feel whatever economic numbers the Arroyo administration is touting. All this lip service should end now,” said Tanchuling.