Ibon Urges Arroyo to Cut Back on Debt Payment

As government’s economic managers prepare a contingency plan for the US financial turmoil, research group IBON Foundation urges the government to immediately increase social services spending to cushion the effect on the people.

The Arroyo administration’s severe cutbacks on social services spending in the last few years have eroded the real value of the budgets for education, health and housing and it needs to spend an additional P165.8 billion just to restore these to their levels in 1997, during the Asian financial crisis.
The government’s budget for social services has not kept pace with inflation and the growth of the population. This means that despite seeming increases in the nominal budget for education, health and housing, the real value of spending per Filipino or taking inflation into account has fallen drastically.

In 1997 the government spent P95 billion for education, P14.2 billion for health and P2.4 billion on housing. In the proposed 2009 budget the corresponding amounts are P204.9 billion, 35.8 billion and 5.3 billion. However prices will have increased 101% between 1997 and 2009, assuming an inflation rate of 10% in 2008 and 7% in 2009. The population will have also increased by 20.6 million Filipinos to 92.2 million in 2009 from 71.6 million in 1997.

Taking inflation and population growth into account the government needs to spend an additional P143.4 billion on education, P18.7 billion on health and P3.6 billion on housing to bring inflation-adjusted spending per Filipino back to 1997 levels.

The total amount of P165.8 billion is for instance equivalent to some 25% of debt service in 2009 of P636.1 billion, covering interest and principal payments on foreign and domestic debt. The current global turmoil which is having such serious effects on the Filipino people is justification to call for an emergency cutback in debt payments.

Unfortunately, successive governments including the Arroyo administration have vigorously opposed any debt moratorium, cancellation or repudiation on the grounds of protecting creditworthiness. This lack of vision in the government’s debt management policy has however proven to be extremely burdensome for the people, and will remain such especially amid the global financial crisis. (end)

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