Category: debt
instead of chacha, revoke automatic appropriation for debt service!
my first reaction upon hearing of senate president enrile’s and house speaker belmonte’s joint call for charter change soon after the impeachment and ouster of the chief justice, of which they were prime movers, was to wonder, ano ito, quid-pro-quo? the president owes them for corona and this is what they want, okay, hope for, in exchange? it’s a relief, of course, that the prez was quick to reply that chacha is not a priority of his administration, kahit na i don’t agree with the it-aint-broke-so-why-fix-it rhetoric.
this time the arguments for deleting, changing, whatever, the nationalist, protective economic provisions are old and new. old is the one about attracting foreign investments that our economy direly needs daw. new is the one about giving the military a bigger budget than education, the better to build an armed force capable of driving away the chinese from west philippine sea territory.
re foreign investments, as usual some agree, some disagree: economist calixto chikiamco and senator joker arroyo agree; economist solita “winnie” monsod and columnist conrado de quiros disagree. re an improved military budget, however, i have yet to hear anyone agreeing. the palace via lacierda says there are already efforts to upgrade the capability of the military for a minimum defense position. senator trillanes prefers the more prudent alternative of a peacefully resolving our differences with china and reviving our relationship as economic partners. and senator miriam thinks charter change to boost military strength is “just wrong”:
“We just don’t have enough resources to be a world or even a regional military force… What we need is a more effective Coast Guard, not the Navy itself,” she said.
She added that she finds nothing wrong in the Constitutional provision requiring the government to allocate most of its annual budget to education.
“The hierarchy of priorities should begin with the mind. If we are clever, we can outclass the Chinese,” she said.
philstar columnist ana marie pamintuan also objects to a bigger budget for defense than for education.
The Constitution stipulates that the state “shall assign the highest budgetary priority to education…” Enrile thinks this should be subject to change depending on the nation’s needs.
Debt payments in fact have always eaten up the largest chunk of the annual national appropriation. Maybe Budget Secretary Butch Abad can devise a similar creative way of going around the constitutional provision to finance the achievement of the administration’s goal of minimum defense capability.
… As it is, education (and health, for that matter) are still pitifully lacking in funding. So if defense spending will be increased, it will have to be taken from other budgetary items.
indeed. it’s not as if education’s budget is anywhere close to enough. the dismal lack of classrooms and textbooks and toilets and running water for our public schools is public knowledge. so is the low low pay of our teachers — no wonder they opt to work as domestic help abroad as a matter of survival. so is the poor quality of public education hereabouts — k-12 won’t make a significant difference, promise! not without money for teacher and curriculum upgrades.
so really, it’s a major major puzzlement how the senate president can even think of making bawas from that pitifully inadequate budget just to make dagdag to the defense budget. yes, china is a problem. yes, we need billions, even just for minimum defense, much more for the wishlist of jetfighters, mini-submarines, well-armed frigates, corvette-size combat vessels and minesweepers. but changing the charter to take money away from education to fund any of that is simply daft, when we could, should, as pamintuan suggests, be looking instead at annual debt payments that eat up the biggest chunk of the budget.
pamintuan, however, is mistaken in thinking that the automatic appropriation for debt service is provided for in the constitution. read the freedom from debt coalition (FDC)”s Briefer on the Automatic Debt Servicing Provision
It was during the Martial Law in the Philippines that automatic appropriation for debt service was first codified, in Section 31(B) of Presidential Decree 1177 (Budget Reform Decree of 1977). In consonance with her “honor-all-debts” policy, Aquino signed into law the Administrative code of 1987, copying en toto Section 31(B) of PD1177 into Section 26(B) of the code. Section 31(B) of PD1177 also serves as its legal basis.
read this explanatory note to House Bill 1962 authored by kabataan partylist rep mong palatino proposing the repeal of the automatic appropriation for debt service:
Because the government willingly binds itself to a law enacted not through the legislature, but by the decree of a dictator during the dark days of Martial Law to automatically spend more than a third of its annual budget on debt service, its spending on social services, from education to health care has always been grossly insufficient …
so there. THAT deserves to be repealed, amended, undone. THAT should be the priority of congress, not charter change. i’m not saying let’s not pay our debts, i’m saying let’s pay in amounts we can afford. what the senate and the house of reps should be wanting to change is not the constitution but this odious marcos decree that cory copied in full, unconditionally, without reservation, and which the fernan supreme court upheld :(
here’s senator angara, who also wants the policy changed:
Angara, vice chairman of the Senate Finance Committee, said that debt servicing eats up a significant portion of the national budget, depriving the poor of their right to social services. He said that at least 40 percent of the country’s budget goes to servicing of interest payments and principal amortization of debts.
During the interpellation for Senate Bill No. 2857, “An Act Institutionalizing the Participation of Civil Society Organizations (CSOS) in the Preparation and Authorization Process of the Annual National Budget, Providing Effective Mechanisms Therefore, and for Other Purposes”, Angara stressed that the policy on automatic appropriations on debt service further encourages reckless borrowing and spending as it guarantees payment without legislative intervention and without going through a thorough screening.
“The power to realign the budget and savings and the automatic debt appropriations make for a deadly combination as it allows the manipulation of the National Budget. As long as these loopholes exist, the temptation will always be present. We must therefore revisit and propose amendments to the budget laws to ensure fiscal discipline,” he proposed.
so, really, when i read this in the news today:
Senate President Juan Ponce Enrile said he did not have in mind doing away completely with the 60-40 ratio favoring Filipino investors over foreigners.
“Just that we need to give ourselves the flexibility by authorizing Congress to change the ratio when there is a need for it. But (the idea is) always to protect the interest of the Filipino people in controlling the economy,” Enrile explained in a radio interview over dzBB radio Sunday.
… my reaction was, OMG, invoking the interest of the filipino people in controlling the economy! does he think we’re morons? if the interest of the people were truly the guiding principle of congress, matagal na dapat na-undo ‘yang automatic appropriation for debt service na ‘yan.
read walden bello’s In the shadow of debt: the sad but true tale behind a quarter century of stagnation that i blogged about in may 2008, when gloria’s congress was pushing for con-ass. i was against chacha then as i am against chacha now.
hindi charter change ang dapat nating pinag-uusapan. not at all. ang dapat nating pinag-uusapan ay ang pagbabago ng debt policy natin. we spend on the average half of the budget on bayad-utang and bayad-interes para lang makautang uli. ano ba yan. enough na please of the model debtor strategy that has only made a basket case of our economy.
and in the comment section, TonGuE-tWisTeD wondered,
Do these big lenders give the president of a country incentives or commissions for paying early? Gloria says we need to take advantage of the strong peso by retiring most of our debts earlier. Fishy, no?
and president aquino has been doing exactly the same thing, sabay pahiram ng one billion dollars sa IMF, sabay gloat that we are no longer a debtor country but a creditor na daw. LOL! read Govt debt hits P5.147 trillion and weep.
new year wish 2011
clinton’s campaign strategist carville was right, “it’s the economy, stupid” that won clinton the presidency in 1992, trumping bush senior’s foreign policy high from the “successful” gulf war.
here at home it would seem that the president and his men know it too, that it’s the economy that truly and urgently needs working on.
“We are conscious of the fact that we are in a debt hole. We can only begin to climb out if we strictly implement austerity measures and cut down on unnecessary spending,” said Malacañang aide Paquito Ochoa.
but is there a plan? asks business world‘s amelia h.c. ylagan:
The national budget in 1986 was P250 billion and 70% of that went to servicing the US$26-billion debt that Cory’s predecessor, Ferdinand Marcos, grew from the $465-million 1965 level, in his 20-year reign. The 50 million Filipinos (in Cory’s time) had to live on the remaining 30% of budget. And then there were the many military coups d’état from the misguided military who wanted to take advantage of the weakness of the country at that time. Cory could not have worked a miracle in six years, many now allow in judgment of her. Some may also say that in comparison, her successor, President Fidel Ramos, probably benefitted from the six-year cycle of painful adjustment and realignment before him, and he successfully augmented what would have been economic deficits with significant one-time proceeds of the privatization of some big government-owned and -controlled corporations.
Survival and growth might be more difficult in Noynoy’s presidency. There are 92.2 million Filipinos (84% more than 1986 population), owing about P47,000 per head for about P4.3-trillion debt (US$ 95 billion approx.) The Asian Development Bank (ADB) warns of extreme debt stress as the country holds the highest debt-to-GDP ratio at 56.5%, the highest among Asian countries. This key measure shows how a country can manage its obligations from its annual economic output, with a declining ratio viewed favorable as this means the country would allot a smaller amount to pay off its debt. But based on the ADB’s projections, the Philippines’ debt-to-gross domestic product (GDP) ratio may rise by 15% by 2015 in a scenario of higher primary deficit to GDP; by 5.1% amid lower nominal GDP growth rate; by 3% on higher nominal interest rates on public debt; and by 12.7% on a combination of the three negative scenarios.
So, is there a plan to address these scenarios of where we, as a country might be going, how we are going to get there, and when we will get there.
grabe, we are deeply in debt to the tune of Php 4.3 trillion, that’s $ 95 billion. ylagan rightly asks if there’s a plan, what’s the plan, considering that the president vetoed the debt cap provision inserted by senator joker arroyo in the P1.645-trillion 2011 national budget, which would have limited government’s borrowing to 55 % of gross domestic product.
Malacanang has defended President Benigno “Noynoy” Aquino III’s decision to veto the debt cap in the 2011 General Appropriations Act.
Presidential spokesperson Edwin Lacierda said this is a good time to borrow given the favorable market conditions like the strong peso and the appetite for peso bonds.
so that’s the plan? since creditors are willing to lend, we will just borrow and borrow, ganoon, bahala na si batman. but, as senator joker points out:
The US is, in many ways, our model. There is a debt ceiling in the US President’s power to borrow money, but the US Congress would invariably increase the ceiling whenever it is justified by necessity,” he said.
“For the cause of fiscal prudence and transparency, why can’t we adopt the same?” he asked.x
why not indeed? i wonder if it has anything to do with what former senator orly mercado said, when he was the new president erap’s secretary of national defense, that when you’re in the driver’s seat na pala, the view, the perspective, changes and campaign promises prove unrealistic. or something to that effect.
could it be the same for president aquino? but who exactly is holding him hostage to the old rotten system, making real CHANGE impossible? what exactly are these forces beyond his control? i wish he’d tell us so we can all grow up and face the unpleasant consequences of our past actions and/or inactions.
and then, again, the president could just be in over his head? sana hindi. and that’s my happy new year wish for us all ;))
obscenely oppressive, that’s VAT!
it’s obscene that the arroyo government is gleefully rolling in cash when everyone else is not, lalo na’t the source of all that cash is the onerous VAT that we the people are paying in addition to the spiralling death-defying prices of basic necessities. no wonder sadsad ang approval rating niya sa latest sws survey.
For the first time, gross dissatisfaction is at majority levels in all study areas: 63% in Metro Manila, 60% in the Balance of Luzon, 56% in the Visayas, and 62% in Mindanao,” it said.
ang reaction ng palasyo, okay lang because she is doing what’s right, never mind what’s popular, which is a lot of crap.
what exactly is she doing right ba? is it right not to scrap VAT on fuel and electricity because in her estimation it would benefit only the rich who consume the most fuel and electricity? i say it’s wrong and it’s heartless. the rich make up only 10 percent at most of the consuming population, and they have surplus money (kaya sila tinawag na rich), so paying VAT doesn’t hurt them as much as it hurts the 90 percent, the masses of poor and middle-class who could barely make ends meet before the surge in oil prices and who are now growing more anxious and agitated and angry by the day.
if gma were truly smart, and brave, and she wants her ratings to rise, what she should do is get really progressive and find another way of taxing only the rich.
as for the excuse that without the VAT collections gma would not have funds for social services and development projects, ang masasabi ko lang ay: what social services? what development projects? kung meron man, mangilan-ngilan, purely for show. i actually stopped believing that the arroyo government has any sense of public service since learning that most public schools in metro manila have no toilets and running water for our teachers and our children, susmaryosep, how terrible and despicable, how mean and barbaric a state of affairs!
i don’t care either if scrapping VAT means kukulangin si gma ng pambayad sa ating mga utang. kulang kung kulang. better yet, moratorium muna, until better times, as marck ronald rimorin suggests sa filipino voices given the global financial, food, and energy crisis.
Arbet Bernardo of AWBHoldings.com asks…, “Should we do an Argentina?” I would rather see things in terms of context. While it would be a great – no, terrific – idea if we give global financial lending institutions the middle finger and say we’re not paying for debts we never benefited from as a nation, there is still prudence in honoring our debts, just not now when we cannot afford to do so. The premise is rather simple: if you can’t afford to pay an outstanding debt, you should only pay it when you are financially capable of doing so. We can’t undo that crucial financial mistake made by former President Cory Aquino, but what we can do is to respectfully renege on the promise of “honor all debts” until such time that we can pay debt without feeling anything drastic or dramatic…..
My…recommendation would be to reallocate our financial resources, not pay debt for now, and redirect debt servicing to subsidize the people’s cost of living. From there, we could think of other solutions that go beyond Presidential recommendations for a family to eat camote and have a viand of munggo at dilis while everyone asks what’s really up with ‘borjer’ served somewhere in Greenhills.”
outof the mouth of babes. sounds good to me.
the downside, of course, is, if we scrap VAT and stop paying debts for now, wala rin daw magpapautang sa atin for now. but maybe that’s not such a bad thing – maybe then we’ll learn to live within our means for a change. maybe then we’ll be forced to buckle down, start looking out for each other, and get our act together as a truly independent and sovereign nation.