Category: debt


Disturbed by a thread where some good and respected friends are somehow engaging in intellectual masturbation on whether the Philippines was in default in 1983. The entire point of the relevant discussion is whether and to what extent the Chinese loans contain potential risk of seizure of our assets, in case we’re unable to pay. WE WERE UNABLE TO PAY CREDITORS IN 1983. And we economists and lawyers dance around what to call that event — either as a technical or a de facto default (since we couldn’t pay), or as some now claim, a non default since the creditors didn’t press for their pound of flesh (and they allowed for a debt rescheduling). Does that cop-out somehow make us feel better about the original point? DO CHINESE LOANS CONTAIN POTENTIAL RISK OF SEIZURE OF OUR ASSETS, IN CASE WE’RE UNABLE TO PAY? DO YOU SERIOUSLY THINK THIS CREDITOR WILL ALLOW US NOT TO PAY, OR ALLOW RESCHEDULING (LIKE IN 1983)? Sabi ng lolo ko, ang hirap gisingin ng nagtutulug-tulugan.

Ronald U. Mendoza 
Dean, Ateneo School of Government

pinoy education: from bad to worse, k-12 and all

read conrado de quiros’s Making the grade, part of which dwells on the allocation for debt payments being 3 times larger than that for education:

… our schools are getting worse. Only the University of the Philippines remained among the top 100 of 300 schools in Asia. Ateneo de Manila University, De La Salle University and the University of Santo Tomas, though still in the middle ranges, slipped during the past year. Specifically, UP improved from 68th to 67th while Ateneo fell from 86th to 109th, La Salle from 142th to 151th, and UST from 140th to 150th.

Rep. Luz Ilagan, a former university professor, says this is due to schools preferring quantity to quality. Many universities are really just diploma mills offering popular courses based on public demand. Poor-quality elementary and high school education lead to poor-quality students entering college. Some of them have barely passable comprehension and writing skills.

Rep. Antonio Tinio says it’s funds, or the sore lack of them. “In Asia, public universities rule. In order for our higher education sector to become competitive, the government must drastically step up its funding and other support for our state universities and colleges. Unfortunately, government higher education policy over the last two decades has gone in the other direction, towards budget cuts, contractualization of faculty and commercialization.”

Ric Reyes of the Freedom from Debt Coalition puts the case of lack of funds for public education more forcefully. Last year, the budget for debt payments was P739 billion, three times more than the budget for education, which was only P224.9 billion. The latter was only 2.2 percent of GNP, well below the world benchmark of 6 percent. Unesco notes that the Philippines has the lowest expenditure for education in proportion to total budget. Since 1955, education has dropped from 30.78 percent of the budget to 15 percent post Edsa. This year’s education budget at 14.97 percent is lower than the post Edsa average of 15 percent.

I share their sense of apprehension, if not alarm, at the state, and future, of our education. With some caveats.

Certainly, I agree that we need to revise the budget and give education the utmost, ultimate, first-and-last priority it deserves. Which, not quite incidentally, the Constitution decrees. Debt payments are not the national priority, education is. Which, not quite incidentally as well, shows the continuing horror of martial law: To this day we are still paying for the Marcoses’ debt. Next time Imelda throws a party, know that you and your children are paying for it.

I don’t care if government makes all sorts of excuses to defer payment (“Sorry, but we have mouths to feed and minds to open”), or more conciliatorily negotiates to restructure payments again and again, but education should be three times more than debt payments. Hell, education should have half the budget, if we are going to have half the chance to curb, if not eradicate, poverty….

and read ben kritz’s Expanded program getting off on the wrong foot, mostly about k12 and how it’s meant, not to improve the quality of education, but to prepare students for overseas foreign work.

Rep. Luz Ilagan of Gabriela party-list criticized the government for “only adding quantity, not quality” with the implementation of the K-12 program, in reaction to a recent ranking that placed only five (down from 14 a year ago) Philippine universities among the top 300 universities in Asia. Ilagan’s contention is that the quality of Philippine higher has declined because of the poor preparation of incoming freshmen students and a fixation “on getting many students to graduate from popular courses that markets demand”; not nearly enough attention has been paid to improving the quality of the primary and secondary curriculum, in Ilagan’s view, therefore the K-12 program as it has been presented will have no real positive effect in improving the Philippines’ al reputation.

Ordinarily I regard the viewpoints of acknowledged leftists with a high degree of skepticism, particularly those expressed by the Migrante group, which has the seemingly incompatible objectives of promoting the interests of overseas workers while working towards eventually ending the labor export phenomenon. Over the weekend, however, I attended the annual parents’ orientation meeting at the private school where my three children are enrolled, and I was surprised, to say the least, at the “official” point of view towards the K-12 program. The academic director of our school—which already had a robust academic and extra-curricular program, as well as a good reputation for producing college entrants—in addressing the K-12 program offered the opinion that it “would better prepare students to find work overseas because of its focus on vocational training, and the fact that the students will be 18 [years old] [and thus legally employable] when they graduate high school.”

Knowing how diligently our school’s administration coordinates its management with Department of (DepEd) policy, it would now appear as though the complaints of Migrante’s Martinez and Ilagan have considerable substance. And if, in fact, the enhancement of the Philippines’ human export resource is a priority of the K-12 program, then the fears of many that the extended curriculum was implemented for all the wrong reasons are completely valid.

back in july 2010, then ateneo president fr. bienvenido nebres criticized the aquino admin’s k-12 plans, recommending instead that extra years be added to “select college courses”.  fr. ben was ignored, of course, as the agenda, it would seem, has always been to perpetuate the pretense of “sound economic fundamentals” via OFW remittances.


that rating upgrade

… is good news only for the minority rich, not for the majority poor.

check out cielito habito’s An early Easter gift

So what’s in the credit rating upgrade for the ordinary Filipino? It’s actually a mix of good news and bad news. The positive side is that more investments—both of the job creating (FDI) and the “hot money” kind—should be drawn into the country by this new vote of confidence; let’s hope there will be much more of the former. Government and firms could borrow funds more easily and more cheaply. Lower interest rates would mean lower costs for government debt, freeing up more funds for health, education, infrastructure and other public investments to uplift people’s lives.

But the negative side is that a major segment of our population faces the very real prospect of lower incomes. Families relying on remittances from abroad, or from earnings in import-substituting or export-oriented industries (including tourism) will be hurt by a rising peso induced by the surge in foreign inflows. Pensioners, retirees and other savers relying on interest earnings from fixed-income placements will also see their incomes drop further. A retiree recently wrote me complaining that his interest income had dropped 40 percent in the past year alone because of falling interest rates, and laments that he now faces a serious problem with making ends meet.

and ben kritz’s Curb the ratings upgrade euphoria

President Aquino’s statement described the positive outcomes of the ratings upgrade as lower interest costs on government debt, making Philippine securities more attractive to investors, and “fiscal space” from the savings on debt costs, savings that can be used “to sustain and further improve on social protection, defense, and economic stimulus, among others.” The only part of that statement that is completely accurate is the first part. The specific meaning of the rating is a judgment of the country’s ability to pay foreign-denominated debt on time and in full, and because the Philippines is now judged to be at lower risk of default by one agency, the government will not have to pay so much to incur debt; interest on direct loans will be a bit lower, as will yields on government bonds.

As for the “savings” that can be applied to other activities, that presumes the government will incur new foreign debt, which most would consider a rather novel conception of “savings.” Furthermore, in a memo released on March 17, Treasurer Rosalia de Leon informed bond dealers that the Treasury will be increasing its monthly auction of 3-, 5- and seven-year bonds and treasury bills from P120 billion to P150 billion through the second quarter, as part of an effort by the government to source all its debt locally for 2013. In other words, the government has no plans for now to access the foreign credit market where the impact of the ratings upgrade would be felt the most.

and gary olivar’s Early Easter gifts

Perhaps the most important thing to remember about this credit rating upgrade is this: At the end of the day, it really matters only to professional portfolio managers who may be restricted from putting their money in non-investment-grade credits. Even with its shiny new investment grade, the Philippines will still have to compete with its new peer group for portfolio attention. And direct foreign investors—the ones who really bring in the jobs—will be totally unimpressed since they’re concerned with an entirely different set of issues altogether.

The new rating—like any other credit rating—speaks only to the country’s ability to repay its foreign-denominated debt, nothing more. It says less about whether or not equity investors can expect to earn the right returns on bricks and mortar on a level playing field. And it says nothing about whether we are investing properly for future growth, or creating more jobs through the right kind of growth, or improving our productivity as the only way to sustain long-term growth.

Unfortunately, like most early gifts, the packaging may be nice and glitzy—as the Palace will try to hype it up—but what’s inside is not what we really need.

read, too, atty. dodo dulay’s What PNoy isn’t saying about PH’s rating upgrade

national debt, keeping track

MANILA, Philippines (Xinhua) – The government debt increased to P5.38 trillion ($132.25 billion) as of November last year due to higher domestic debt, the Bureau of Treasury said today.

The end-November debt of the national government was P22 billion ($54.08 million) higher from end-October 2012 level. Thirty seven percent of the total debt was owed to external creditors, while the rest was borrowed from domestic creditors.

External debt decreased on back of the strengthening of the peso as well as the net depreciation of third currencies against the US dollar. Domestic debt increased due to net issuance of government securities.