Fiscal crisis sparking off

1. At the end of August 2004, PGMA admitted that the Philippines is going through a fiscal crisis, one that threatens to get much worse and lead to an economic collapse within the next two years (FDC).
2. The NG had been running a huge deficit since 1999 – almost 20% of the national budget in 1999 to more than 28% in 2002 (FDC).
3. Interest payment on the NG debt has gone from 20% of the NG budget in 1999 to more than 28% in 2002 (FDC).
4. The increase in NG borrowings took a sharp turn starting 1998 and by 2002 had reached unprecedented levels (FDC).

The National Government debt

1. The NG debt comprises more than 50% of the public sector debt.
2. The outstanding debt of the NGs increased from P48.94 billion in 1981 to P3.35 trillion in 2003.
3. For FY 2004, the NG outstanding debt is estimated to reach more than P3.45 trillion
4. From 1999 to 2004, a span of six short years, NG debt increased 100%.

Vicious debt cycle

1. Debt has been a major problem since 1980s.
2. From 1990 to the year 2000, total Philippine debt grew at the rate of 63.71%. The last three years saw even more rapid deterioration of the debt situation.

The Public Sector debt

1. Total consolidated public sector debt (Foreign and domestic) has already exceeded the country’s GDP.
2. For 2001, CPSD amounted to P4.41 trillion or 120% of GDP.
3. In 2002, it became 128% of GDP at P5.16 trillion.

Contingent Liabilities

1. Contingent liabilities are obligations that have been guaranteed by the government.
2. Guarantees include sovereign guarantees to liabilities of GOCCs as well as risk guarantees to private corporations under contract with government.
3. Contingent liabilities are not classified as debts until certain conditions arise which then require the government to assume payments for these obligations.
4. The very high level of contingent liabilities is of equal cause as the public debt.
5. In 2002, the WB estimated the Philippine Contingent liabilities to be more than P3.2 trillion.

Campaign on debt audit

1. Pushing the Philippine congress to conduct an official Congressional debt audit and ensuring people’s participation in this official audit.
2. Conducting a parallel and Independent Citizen’s Debt Audit.

1. The Arroyo administration obtained the highest debt compared to her predecessors. The NG debt stood at P 3.35 trillion as of end-2003. However, it was affirmed that the debt is cumulative and is not free from peso-dollar exchange rate and inflation.

1. The debt problem is a vicious cycle. In 1965, upon the assumption of Marcos to the Presidency, the government’s debt stood at $ 600 million. When Marcos was ousted, he left $ 26.6 billion outstanding debt. Aquino paid $ 18 billion as interest and principal payment but when her term expired, the government’s debt was $ 36 billion. Ramos paid but also incurred bigger debt after six years. Estrada came and went out of Malacañang doing the same. In three years after Estrada was ousted, Arroyo acquired the biggest debt in the Philippine history. The bottom line is that Marcos obtained the “original sin”. That is why we were trapped in a vicious cycle of stagnation and decline. Hence, the debt policy of the government since Marcos exacerbated the problem. Now, we have the so-called “fiscal crisis” which, they say, may lead to an Argentina-type situation.

1. The minimum considerations of the FDC in bringing light to the crisis were debt renegotiation and the revaluation of bonds. At the very least, debt repudiation was also considered. All these could be undertaken after the public debt audit to be initiated by congress. Particularly, the FDC suggested that the public audit be focused on the impact of programs and projects funded by borrowings to the environment, people’s dislocation, and to economic growth. They are particularly opposed to some of the recommendations of the professors from the UP School of Economics regarding the power rate increase. 

1. The debt problem is above all, a policy issue. First, borrowing is too easy to do. There was no congressional oversight. Congressional approval could guarantee a “prudent” borrowing.

1. PD 1177 or the Automatic Appropriations Law guarantees honoring all our debts. The creditors loosely lent because there is an automatic appropriations anyway. They cared less on scrutinizing the programs or projects being funded by the money that came from them. PD 1177 was a brainchild of the Marcos regime. When Aquino took office, despite of having the option of debt repudiation, she opted a policy honoring all our debts. If this problem continues, the 11 UP professors predicted that the economy will crash in two years

1. On the discussion on “what to do”, it surfaced out that there must be laws that would make borrowing a “difficult” task so that we will not end up “paying without questions”. The Philippines is the only country in the world with such an automatic appropriation law according to the FDC. The task of auditing all public debts incurred since the post-Marcos era is long over-due. The deficit is caused primarily by the large percentage ratio of debt servicing to GDP – when you acquire more debt, more will also be paid in interest and principal payment. When the deficit goes up, the government habitually resorts to more borrowings. The cycle goes.

1. A significant portion of the public sector debt during the third quarter of 2003 (P 5.39 trillion) comes from the NPC. At the end of 2003, the audited financial statement of the NPC showed P 1.17 trillion in long-term debts and lease obligations to IPPs.
2. Of all NAPOCOR debts, the BNPP loan (until it was assumed by the National Government in 1986) and current contracts with IPPs are the most burdensome and onerous. The original BNPP loan was $ 1.084 billion. By December 1988, the loan amounted to $ 2.67 billion, accumulating interests and other add-ons to the tune of $ 1.58 billion. Today, 28 years after construction began, the Filipino people is still paying the BNPP debt. Interest payment amounted to P 496 million in 2003, while principal payments amounted to P 1.78 billion (Bureau of Treasury).

1. The guaranteed income for IPPs was a burden to the government and the consumers. For example, NAPOCOR promised to buy 70%-90% power (actually generated/utilized or not) of the total capacity of IPP plant. This is the so-called take or pay agreement. Another is the fuel cost guarantee - NAPOCOR will supply fuel to IPP, and subsequently absorb any fluctuations in the cost of fuel. The foreign exchange rate guarantee – All IPP contracts are in US dollars. NAPOCOR absorbs any dollar fluctuation (FDC).

1. Therefore, as consumers, Filipinos have to pay higher power rates because NAPOCOR’s debts and guarantees to these IPPs add to the public sector debt, which we pay for as taxpayers. According to Manasan, in 2003-2004, the bulk of the public sector deficit was traced to NAPACOR (77%-78%). Also, according to Cong. Andaya, NG-assumed debts by NAPOCOR will increase the targeted deficit of P197 billion by P 36 billion this year.