FDC President Ed Tadem speaks on debt and fiscal justice during a press conference at the Philippine Conference on Illicit Financial Flows, Debt and Tax Justice held at Cocoon Boutique Hotel in Quezon City from 14-15 April 2016. With him are (L-R): Rep. Leah Paquiz of Ang Nars Party-list; Prof. Walden Bello, independent Senatorial candidate; Renato Magtubo of Partido Manggagawa, party-list candidate; Benjo Basas of Ating Guro, party-list candidate; and Lidy Nacpil, FDC Vice-President and Regional Coordinator of the Asian Peoples' Movement on Debt and Development (APMDD). The event was jointly sponsored by FDC and APMDD.
Amidst the global controversy on the Panama Papers on potential illegal financial activities that allegedly implicated Filipino politicians, business moguls and political candidates now running for office, the Freedom from Debt Coalition (FDC) reminded candidates of the adverse impact of the continuing debt dependence of the country and weak taxation policy.
“The Panama Papers shows the rampant illicit financial flows which is a global phenomenon that implicates Filipino politicians and may only be the tip of the iceberg since there are many tax havens and the full disclosure of the Panama Papers will only be done in May,” said Prof. Ed Tadem, FDC president.
“The phenomenon of illicit financial flows represents resources that could have been used meaningfully in the country for essential programs and projects and even for investments that should reduce if not free us from our dependence on foreign and domestic debt,” Tadem said.
“Only a progressive and accountable fiscal policy and just taxation, where revenues really go to government expenditures to better social services, will eventually liberate the Philippines from continued borrowings that push further the country to perpetual indebtedness,” Tadem added.
“While outstanding national government debt now consists mainly of domestic debt, and officials claim to have managed it well, the Philippine debt problem is far from over. It deserves closer scrutiny and critique,” Tadem added.
At present, FDC argued that the change in the country’s debt profile may have reduced the transfer of its resources to foreign capitalists but expanded the space for the local elites, who are the only ones with idle savings to invest in government securities, to profit from the national government’s continued dependence on new borrowings to amortize existing loans and to plug budget deficits.
“It is true that the country’s capacity to pay is improving but the “power of the purse” remains hijacked and public coffers are bled by continuing payments for what FDC considers as illegitimate debts,” Tadem argued.
At the end of year 2016, the National Government’s actual outstanding debt will reach P6.42-Trillion or P62,235.26 per capita if President Noynoy Aquino’s planned borrowings for 2016 pushes through.
FDC data said that out of the total P214.5-Billion scheduled debt servicing in 2016 for foreign liabilities of the national government, at least P3.7-Billion will go to interest and principal payments of five (5) questionable and illegitimate loans. This huge amount could have been redirected to inadequately-funded social protection programs such as education, health, and housing. Many more would probably be uncovered if all loans contracted by the government are closely scrutinized, FDC said.
The five programs that FDC considers funded by illegitimate loans are marred by corruption, bloated budget, violation of legal procedures, lack or insufficient public consultation and used as lender’s conditionality for privatization of public utilities. These are the Power Sector Development Program, Tullahan (Sixth) Road, Pampanga Development Flood Control Project, Bohol Irrigation Project Stage II, and the Angat Water Supply Optimization.
“In the first 100 days, along with the enactment of the Freedom of Information Bill, the next president should call for a debt audit of these illegitimate debts or the debts that violated the common principles of human rights and sustainable human development, justice and fairness, accountability and responsibility, sovereignty of peoples and nations, and democracy," Tadem added.
For many years, FDC repeatedly called for the cancellation of illegitimate debts and the repeal of the Automatic Appropriations Law (AAL) on debt servicing that severely compromises the legislative’s “power of the purse” principle. Since Congress cannot increase the budgetary ceiling, only a little amount of the budget is left for Congressional reallocation.
Tadem said that for almost four decades, upholding the AAL has enabled debt interest payments and amortization to get the first cut of the budget before appropriations are made for other vital public expenditures such as social services.
The Aquino government’s pride in its "successful" liability management strategy pales in comparison to the prevalence of poverty and inequality in the country, overshadows the issues of illegitimate debts, accountability of both lenders and borrowers in onerous loans and its recurring failure to arrest the growth of its social debt or its obligation to its citizens to deliver better social services because of prioritization of debt servicing.
“This ‘liability management strategy’ or the government’s ability to pay its debt, does not correct the oppression and negligence and the accumulated social debt that the Filipino people are made to suffer for decades now,” Tadem added.
Freedom From Debt Coalition
The Freedom from Debt Coalition (FDC) – Philippines is a nationwide multi-sectoral, non-sectarian and pluralist coalition conducting policy advocacy work and campaigns to realize a common framework and agenda for economic development.