PHILIPPINES: TO END RECURRENT FEUD ON DEBT SERVICE CUT, PIMENTEL SAYS AUTOMATIC APPROPRIATION SHOULD BE REPEALED

Senate Minority Leader Aquilino “Nene” Q. Pimentel,
Jr. (PDP-Laban) today challenged Congress to muster
its political will to repeal the moribund martial law
decree on automatic appropriation for debt payments to
remove legal doubts whenever the legislature decides
to reduce the debt service allocation in the annual
budget.

Pimentel issued the challenge in the face of a warning
from Malacañang that the P17.8 billion slash in the
P295.75 billion allocation for interest payments made
by the House of Representatives would result in
“illegal” increase in the 2008 national budget
submitted by the executive branch. The Senate has
scaled down the cut to only P5.7 billion.

He debunked the Palace’s argument that the country’s
credit-worthiness will be shattered if the automatic
appropriation law for debt payments, as embodied in
Presidential Decree 1177 issued by the late President
Ferdinand Marcos, will be rescinded.

“Mr. Marcos is long gone. And yet, we continue to
adhere to this kind of an imposition on the theory
that we cannot borrow anymore if we do away with the
law on automatic repayment of our debt,” he said.

“That is not necessarily correct. The capacity of the
country to pay is the primary consideration why
lenders would extend to us loans that we need, and we
have to justify the loans from time to time,” Pimentel
said.

Pimentel said he is in favor of pruning down the debt
service allocation – which makes up the bulk of the
2008 national budget – to realign the funds to social
and economic services, as well as research and
development but not to fatten the pork barrel of
lawmakers.

The Senate minority bloc has called for the beefing up
by P20 billion the funding for social and economic
services next year, including education, health,
agriculture, environment and science and technology.

Pimentel said the government should not tolerate
anymore the atrocious situation where it has to pay a
gargantuan P624.09 billion in total debt payments next
year – consisting of P295.75 billion for interest
payments (about 24.1 percent of the national budget)
and P328.34 billion (in so-called off-budget
expenditures) for principal amortization.

He pointed out that PD 1177 was used by Mr. Marcos to
make debt service automatic under martial law
conditions when there was no Congress to speak of.

“And so for heaven’s sake, we have gotten rid of
Marcos in 1986. But up to now, we are still bound by
such authoritarian ways. These are no longer valid and
cannot be justified under present circumstances,
considering not only the fact that we have a Congress
but also considering the social and economic situation
of the country,” the minority leader said.

Pimentel manifested full support for a Senate
resolution filed by Sen. Pia Cayetano calling for the
reexamination loans that do not seem to have benefited
the people.

Upon the recommendation of the finance committee,
chaired by Sen. Juan Ponce Enrile, the Senate has
restored P12.1 billion of the P17.8 billion cut in the
debt service (interest payments) made by the House to
provide “legroom” for the payment of interest on
questionable or fraudulent loans.

But Pimentel said there seems to be no basis for the
apprehension that the government will renege on the
repayment for tainted loans because the debt service
fund is bloated.

Of the P295.75 billion budget for interest payments,
P186.67 billion is for domestic debts and P109.07
billion is for foreign debts.

The P1.227 trillion budget was computed on the
assumption of a P53 to $1 exchange rate although the
current exchange rate is below P42 to the US dollar.
Monetary and banking authorities have projected the
peso will further appreciate in the coming months.

Citing data from the Freedom from Debt Coalition
(FDC), Pimentel said the reduction of interest
payments by adjusting the exchange rate to a more
realistic level, and by suspending payments for
proposed program project loans “would already account
for as much as P18.85 billion debt service reduction,
about a billion pesos more than the P17.8 billion
reduction by the House of Representatives.”

“Surely, this is more than enough to cover for
interest payments for illegitimate debts should
negotiation and/or debt condonation fail,” the FDC
said.
-o0o-

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