Debt relief 1
Debt relief 1
Updated 00:46am (Mla time) Oct 24, 2004
Inquirer News Service
Editor's Note: Published on page A14 of the October 24, 2004 issue of the Philippine Daily Inquirer
THE 11 senior economists from the University of the Philippines School of Economics did the country a signal service when they issued their now famous paper on the deepening fiscal crisis. But their analysis of the "real score on deficits and the public debt" is relatively silent on a crucial question: debt relief.
Like the classic Sherlock Holmes tale, the UP 11 paper is remarkable because of the dog who did not bark. In their analysis, the economists note that current national government spending is at its lowest in a decade, "net of interest payments." In other words, if we remove interest payments for both local and foreign debt from the equation, government spending is actually smaller now than it was two administrations ago.
The growing public debt, then, is part of the problem; it may in fact be the root of it. Consider, for instance, the fact that the national government budget cannot fund all our development needs. Much of it goes to salaries, maintenance and operating expenses, local governments-and debt service. With very little left to spare, the budget cannot possibly provide the economy what it needs. And yet it is a budget we cannot even afford; we have to borrow even more money to pay for it (hence the deficit).
But the option of debt relief (the telltale dog in the debt narrative) is not discussed in the UP 11 paper. "But why does the UPSE step so gingerly around the public debt issue? Could it be because about 80 percent of the total debt is owed to foreign creditors, and dealing seriously with it will mean having to confront these lenders?" ask UP sociologist Walden Bello and Lidy Nacpil and Ana Marie Nemenzo of the Freedom from Debt Coalition.
To be sure, the widely circulated critique from Bello and the FDC is less than completely intellectually honest. It tries to have it both ways, chiding the UP 11 for "ideological bias" and then later attacking them for lacking "intellectual courage" -- essentially, for failing to transcend that same bias. Now, someone who does not offer a particular solution because he has defined the problem differently may be accused of many things, but by definition intellectual cowardice cannot be one of them.
On the matter of "managing" the growing public debt, however, their criticism is to the point: "It is testimony to how full debt repayment according to the terms dictated by our creditors has become a sacred cow that the UPSE paper fails to even suggest [or] mention the possibility of managing it rationally."
This same sacred cow, more and more Filipinos are beginning to realize, has taken over the middle of the road, blocking all progress. The result, in the technical language Bello and the FDC employ: "Along with the structural adjustment measures imposed under the guidance of the World Bank and the International Monetary Fund, the strategy of making debt repayment the national priority-which has been followed by every administration since Marcos-has created a condition of structural stagnation..."
How do we coax the sacred cow to move and get out of the way?
Perhaps the time has come to reconsider debt relief.
We do not suggest outright repudiation, although some debts, such as the one incurred at grossly disadvantageous terms to fund the Bataan Nuclear Power Plant, qualify for it. We do not suggest a debt moratorium either; it is critical to collaborate with every single creditor.
What we do suggest is debt renegotiation, starting with the debts incurred by the Marcos regime.
Updated 00:46am (Mla time) Oct 24, 2004
Inquirer News Service
Editor's Note: Published on page A14 of the October 24, 2004 issue of the Philippine Daily Inquirer
THE 11 senior economists from the University of the Philippines School of Economics did the country a signal service when they issued their now famous paper on the deepening fiscal crisis. But their analysis of the "real score on deficits and the public debt" is relatively silent on a crucial question: debt relief.
Like the classic Sherlock Holmes tale, the UP 11 paper is remarkable because of the dog who did not bark. In their analysis, the economists note that current national government spending is at its lowest in a decade, "net of interest payments." In other words, if we remove interest payments for both local and foreign debt from the equation, government spending is actually smaller now than it was two administrations ago.
The growing public debt, then, is part of the problem; it may in fact be the root of it. Consider, for instance, the fact that the national government budget cannot fund all our development needs. Much of it goes to salaries, maintenance and operating expenses, local governments-and debt service. With very little left to spare, the budget cannot possibly provide the economy what it needs. And yet it is a budget we cannot even afford; we have to borrow even more money to pay for it (hence the deficit).
But the option of debt relief (the telltale dog in the debt narrative) is not discussed in the UP 11 paper. "But why does the UPSE step so gingerly around the public debt issue? Could it be because about 80 percent of the total debt is owed to foreign creditors, and dealing seriously with it will mean having to confront these lenders?" ask UP sociologist Walden Bello and Lidy Nacpil and Ana Marie Nemenzo of the Freedom from Debt Coalition.
To be sure, the widely circulated critique from Bello and the FDC is less than completely intellectually honest. It tries to have it both ways, chiding the UP 11 for "ideological bias" and then later attacking them for lacking "intellectual courage" -- essentially, for failing to transcend that same bias. Now, someone who does not offer a particular solution because he has defined the problem differently may be accused of many things, but by definition intellectual cowardice cannot be one of them.
On the matter of "managing" the growing public debt, however, their criticism is to the point: "It is testimony to how full debt repayment according to the terms dictated by our creditors has become a sacred cow that the UPSE paper fails to even suggest [or] mention the possibility of managing it rationally."
This same sacred cow, more and more Filipinos are beginning to realize, has taken over the middle of the road, blocking all progress. The result, in the technical language Bello and the FDC employ: "Along with the structural adjustment measures imposed under the guidance of the World Bank and the International Monetary Fund, the strategy of making debt repayment the national priority-which has been followed by every administration since Marcos-has created a condition of structural stagnation..."
How do we coax the sacred cow to move and get out of the way?
Perhaps the time has come to reconsider debt relief.
We do not suggest outright repudiation, although some debts, such as the one incurred at grossly disadvantageous terms to fund the Bataan Nuclear Power Plant, qualify for it. We do not suggest a debt moratorium either; it is critical to collaborate with every single creditor.
What we do suggest is debt renegotiation, starting with the debts incurred by the Marcos regime.
posted by Dante at 12:46 AM
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