Part Two
ACCORDING to non-governmental group Freedom from Debt Coalition (FDC), annual spending on social and economic services remains deficient with debt service still being prioritized by the government. This prioritization results to high poverty incidence and inequality.
“In 2016 FDC’s initial research on outstanding foreign obligations of the national government resulted in 20 loans being identified as fraudulent, wasteful, or useless,” FDC President Eduardo C. Tadem told the BusinessMirror through electronic mail. “The FDC has successfully lobbied for the inclusion of Section 95 in the 2017 General Appropriations Act, which provides for the audit, by the Joint Congressional Committee on the ODA [official development assistance], of the 20 loans in question.”
Based on the Social Weather Stations’s (SWS) first-quarter survey for 2017 on self-rated poverty, hunger and joblessness released in May, 11.5 million families consider themselves as poor. Other poll results revealed 8.1 million families are food-poor, with 2.7 million of them having experienced involuntary hunger in the past three months. Jobless adults are estimated to be at 10.4 million, the SWS survey also revealed.
“The focus of ‘debt sustainability’ is on capacity to pay, it does not reflect the impact of successive administrations’ adherence to neoliberal policies in exchange for access for new lending, and are not an indication of future trends in government’s fiscal management and priorities,” the FDC said. The FDC further pointed out that in 2016, 62 percent of the national government’s (NG) foreign debt is in the form of debt securities. The preference for the latter instrument is due to low cost of borrowings, since the Philippines improved its investment-grade credit ratings from major agencies, like Moody’s, Standard & Poor’s and Fitch, among others.
According to Tadem, the FDC is still working on the institutionalization of a comprehensive debt audit. “One step toward this is Philippine Senate Resolution 253,” Tadem said.
The Resolution directs the appropriate Senate committee to inquire, in aid of legislation, into the foreign loans contracted by the Philippine government within the Last 15 years through the conduct of a debt audit. It was introduced by Sen. Aquilino L. Pimentel III and Ana Theresia N. Hontiveros-Baraquel.
How much is owed
ACCORDING to Bureau of Treasury (BTr) data, total public debt as of 2016 stood at P5.01 trillion, with 58 percent coming from domestic markets and 42 percent from foreign lenders. The 2016 general government (GG) debt to GDP ratio is at 34.6 percent, almost nine-percent points lower than the 2010 level of 43.5 percent.
“As of end-2016, nominal debt held by the GG stood at P5.016 trillion, 58 percent of which is accounted for by domestic borrowings and 42 percent from foreign creditors,” National Treasurer Rosalia V. de Leon said.
The nominal GG debt of the country comprises the outstanding obligations of the NG, Central Bank Board of Liquidators (CB-BOL), social security institutions, local government units less the intrasector debt holdings of government securities, according to the BTr.
“For 2017 we expect our gross borrowings to amount to P727.7 billion, 75 percent of which is to be secured from domestic sources and the balance from external debt including ODAs,” de Leon added.
The FDC pointed out that for 2016, total outstanding public debt or NG debt is P6.6 trillion, which includes government-guaranteed debt of P513.67 billion. While actual NG debt is P6.09 trillion: P3.93 trillion domestic debt and P2.16 trillion foreign debt.
Debt increase
DE Leon further explained that to finance the 3-percent deficit set by the Duterte administration, an estimated increase in gross borrowings amounting to P888.2 billion in 2018 will be targeted, with 2017 borrowings seen at P727.7 billion, still maintaining the 80:20 financing mix.
“To finance the 3-percent deficit earlier set by the Duterte administration, we forecast our gross borrowings to increase from P727.7 billion in 2017 to P888.2 billion in 2018,” she said.
Finance Undersecretary Gil S. Beltran earlier pointed out that the government’s debt will naturally increase, since funds need to be spent on infrastructure programs.
“It has to increase because we are building infrastructure,” Beltran said. “And savings have to be used for production, which means that you set aside a certain percentage of income for investment in goods that will allow us to produce more like building roads, airports and bridges.”
As to the duration of the payment of debt, the National Treasurer pointed out that the government continues to engage in prudent debt management without sacrificing its growth objectives for the Philippine economy.
“We will continue to engage in prudent and proactive debt management to meet our obligations without sacrificing our growth objectives,” she said. “Moreover, improvements in our credit ratings, diversification in our investor base and generous flows from ODA partners, debt will remain manageable and affordable.”
De Leon added that the revenues from the Comprehensive Tax Reform Program of the Department of Finance will also provide additional buffers to bolster fiscal resiliency.
To be concluded
Image credits: Alysa Salen