Monday, 12 October 2009
Solon says budget needs of post-typhoon rehab a good reason to renegotiate debts
As Congress rushes passage of the 2010 budget, a lawmaker is renewing calls to suspend interest and principal payments on the country's foreign debt and instead use the funds for disaster response measures.
"It would be the height of insensitivity and callousness if the government continues to allocate billions towards debt servicing when the Filipino people are in desperate need for relief," Bayan Muna Rep. Satur Ocampo said in a statement.
The proposed 2010 budget allocates a big chunk of the P1.541 trillion 2010 budget to interest payments—P340.8 billion or 22.1% of the total budget.
Ocampo is proposing a moratorium on debt servicing for the next 3 to 6 years or "until the country recovers from the series of disasters that have befallen it."
"President Arroyo should do all that is in her power as executive to seek help for the Philippines and the victims of Pepeng and Ondoy. She can start by notifying the International Monetary Fund (IMF), the Asian Development Bank (ADB) and other international finance institutions that the Philippines will be suspending debt payments immediately,” Ocampo said.
The Finance Department has previously planned to tap additional foreign debt requirements from these multilateral lenders to help plug a widening budget deficit due to the effects of the global economic slowdown that started last year.
As of July, the Philippines total debt stock stood at P4.227 trillion, with foreign debts accounting for 44%. Over P1 trillion was raised from the issuance of sovereign bonds while P792 billion was incurred through loans from the multilaterals, which are cheaper.
Not the first time
This is not the first time the issue of declaring a moratorium on debt servicing is being raised.
Since the law to automatically appropriate from the national budget an amount to fully cover debt servicing requirements was passed in the 80’s, cause-oriented groups, including Freedom from Debt Coalition, have opposed it.
Debt-related budget allocations used to account for almost three-fourths of the national budget, essentially leaving little wiggle room for other government services, including education, security, health, infrastructure, and other social services. (Read: Where did RP debt go)
In previous years, legislators responding to the cause-oriented groups’ lobby have taken to slashing the budget for debt servicing and realigning them to various social services. (Read: Lower RP debt: Truth or spin?)
President Arroyo, however, traditionally vetoes cuts to debt servicing on grounds that it encroaches on the constitutional guarantee of non-impairment of contracts and that it will affect the government’s credit standing.
Budget experts like former budget chiefs Emilia Boncodin and Benjamin Diokno have since discouraged the practice noting that this only strengthened the president’s power over purse. This is because even when the source of funds—the cuts imposed on debt servicing—was vetoed, the president does not directly veto the projects funded through funds realigned from debt servicing and merely subjects certain items under administrative veto.
Essentially, budget experts say, what was meant to be a well-meaning effort by cause-oriented groups only ended up allowing the president to pick and choose what projects to fund.
Diokno supports call
The back-to-back typhoons “Ondoy” and “Pepeng” (international code names Ketsana and Parma, respectively) that recently hit the country, however, changed things.
Sought to comment, former budget secretary and University of the Philippines professor Benjamin Diokno said there is merit to Rep. Ocampo's call.
"I'm not ruling out debt forgiveness, but not debt repudiation. The latter is unacceptable for individual country creditors," he told abs-cbnNEWS.com/Newsbreak in a mobile text message.
Debt forgiveness, or "debt relief," is the act of excusing heavily indebted developing countries from all or part of their "unsustainable" debts. Supporters of debt forgiveness underscore the welfare needs of impoverished nations. Debt repudiation, on the other hand, is a unilateral effort of the borrowing country to pay onerous debts. It also discourages lenders from making “illegal” or graft-laden loans in the future.
Diokno said the call to stop paying the foreign debts can be justified because of the "massive" damage wrought by the 2 storms.
"The devastation has been massive. And remember, this came at a time when the economy is still barely on the road to recovery as a result of the world's great depression," Diokno said.
But Diokno said it's not going to be easy.
"It has to be negotiated bilaterally. It should not be done unilaterally. It has to be shown that the beneficiaries of debt forgiveness or debt moratorium are the poor. But this goes back to governance issue," Diokno said.
Refocus 2010 budget
If a moratorium on debt payment is not an option, Kabataan party list Rep. Raymond Palatino called on his fellow lawmakers to “refocus” the 2010 budget to disaster management, environment protection and social services.
“There are many lessons to be learned from the Ondoy and Pepeng tragedies. Perhaps, the most important is that the government should know where to allocate its funds. We are a disaster-prone country, and thus, this should be a consideration for our economic managers and budget planners,” Palatino said.
Palatino said the proposed P10 billion supplemental budget will not be enough to address the massive relief and rehabilitation needed.
Among the budget allocations that can be realigned, Palatino said, are the following: President Arroyo’s P150 million in intelligence funds; P1 billion for the Commission on Information and Communications Technology’s telecommunication’s office, which he said merely functions to send telegrams
Public hospitals, too
Among the institutions that need budget increases are the public hospitals in the National Capital Region that were damaged by tropical storm Ondoy, said Akbayan Rep. Risa Hontiveros. She raised alarm on the budget cuts saying that a number of these hospital even suffered budget cuts."It's like being hit by disaster twice. These hospitals have already suffered multi-million damage from Ondoy, and now their budget is about to be cut," Hontiveros said.
Hontiveros said she fears that the hospitals may jack up the price of their services and pass on the cost of rehabilitation to their patients.
Based on Akbayan research, the public hospitals will suffer cuts ranging from P1 million to P50 million.
"The least that Congress can do is increase the budget of public hospitals. Allowing these cuts to happen would only prove that the government has learned no lessons from Ondoy," Hontiveros added.
Several hospitals enjoyed budget increases—Quirino Memorial (P18.7 million), Jose Fabella (P3.2 million), National Center for Mental Health (P6 million), and Amang Rodriguez (P15.7million)--but they are not enough to cover the damage caused by Ondoy, said Hontiveros.
Amang Rodriquez Hospital for instance reported damages costing up to P380 million. (abs-cbnNEWS.com/Newsbreak)
Source: http://newsbreak.com.ph/index.php?option=com_content&task=view&id=6944&Itemid=88889053
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