Downgraded
Downgraded
Posted 00:48am (Mla time) Jan 21, 2005
Inquirer News Service
Editor's Note: Published on page A14 of the January 21, 2005 issue of the Philippine Daily Inquirer
NOW that the feared-for has come true -- a sovereign credit downgrade from Standard & Poor's -- comes the finger-pointing between Malacañang and Congress. If the blame-pinning continues, then the country risks a further downgrade.
It may be that the government can take comfort in the confidence of the business community in the face of the credit downgrade. Most of these businesses have either fully funded expansion plans plus liquidity requirements over the medium term or have converted their dollar-denominated obligations into peso debts. But we must remember, this is the case for big business conglomerates. What about medium businesses and recent investors?
The government had it coming, of course. Either through its own complacency or recklessness, it drove up the budget deficit to astronomical levels. There had been some misgivings about President Gloria Macapagal-Arroyo's claim early in her second term that there was a fiscal crisis, following the critique of the country's financial standing by 11 University of the Philippines economics professors. Some sectors had looked at the admission as overkill, a ploy to compel Congress to pass new tax measures. In fact, the just resigned national treasurer, Mina Figueroa, had tried to clarify that the country was not in a fiscal crisis. She said however that if the country did not do something to stem the deficit, then it would slide into a crisis.
To be sure, the Philippines might not have slid into a fiscal crisis, but it has slid into a credit downgrade. Depending on how the government reacts to the development, then the country may risk a crisis, which doomsayers paint along the contours of the Argentina debacle in 2002. And if the buck-passing that has characterized the reactions of the executive branch and the legislature is any indication, then the Philippines could indeed go the way of Argentina sooner or later.
Ah, but the President had declared ahead of the credit downgrade that the fiscal crisis was a thing of the past. This was an instance of crisis handling by wishful thinking. She did not get her wish. Instead she got a downgrade.
The President's declaration was characteristic of the way she handles relations with Congress. If she can't have her way, then she declares the crisis is past or on the way to resolution. When the finance department failed to totally upgrade the sin taxes because of the reservation of lawmakers, she beat a retreat and said that the watered-down version of the bill would do. Apparently, Standard & Poor's thinks otherwise.
Similarly, Congress has been acting in its typically queasy way in response to new tax measures proposed by Malacañang. It has either been politely stalling or outright rejecting any request for new or improved taxes. In short, it has been acting irrationally.
In the first place, there's no rational basis for Congress to reject offhand the tax measures proposed by the executive. Increasing the excise taxes on tobacco and liquor is only practical because both are sin products whose consumption must be regulated. In the same way, widening the value-added tax to cover lucrative professions is not only practical but fair.
Strictly speaking, widening the VAT coverage is not a new tax measure; it's merely improving on a tax measure and plugging the loophole.
While Congress frowns on new tax measures to stem the fiscal menace, it seems unwilling to cut its pork barrel. It passed the 2005 budget with nary a gesture to cut the representatives' P65-million and the senators' P200-million pork barrel.
Considering that the President enjoys comfortable majorities in both the Senate and the House of Representatives, it is unacceptable that she has gone about pulling the nation out of what she admitted to be a fiscal crisis in a manner that has been half-hearted and even clumsy.
The President's weak response to the threatening fiscal crisis has been tentative and clumsy, belying her claim that she's firmly in control together with her vast coalition. If she and the administration lawmakers fail to get their act together and bite the bullet, then they doom the entire nation. It's not as if she's powerless to stop the crisis. Indeed, what is she in power for?
If at all, the protracted fiscal crisis and the weak responses to it have unmasked the canker in our sovereignty -- a powerless leadership that obtains because the people in power don't know how and when to use power where and when it is needed. There is a crisis ahead and we are drifting into it.
Posted 00:48am (Mla time) Jan 21, 2005
Inquirer News Service
Editor's Note: Published on page A14 of the January 21, 2005 issue of the Philippine Daily Inquirer
NOW that the feared-for has come true -- a sovereign credit downgrade from Standard & Poor's -- comes the finger-pointing between Malacañang and Congress. If the blame-pinning continues, then the country risks a further downgrade.
It may be that the government can take comfort in the confidence of the business community in the face of the credit downgrade. Most of these businesses have either fully funded expansion plans plus liquidity requirements over the medium term or have converted their dollar-denominated obligations into peso debts. But we must remember, this is the case for big business conglomerates. What about medium businesses and recent investors?
The government had it coming, of course. Either through its own complacency or recklessness, it drove up the budget deficit to astronomical levels. There had been some misgivings about President Gloria Macapagal-Arroyo's claim early in her second term that there was a fiscal crisis, following the critique of the country's financial standing by 11 University of the Philippines economics professors. Some sectors had looked at the admission as overkill, a ploy to compel Congress to pass new tax measures. In fact, the just resigned national treasurer, Mina Figueroa, had tried to clarify that the country was not in a fiscal crisis. She said however that if the country did not do something to stem the deficit, then it would slide into a crisis.
To be sure, the Philippines might not have slid into a fiscal crisis, but it has slid into a credit downgrade. Depending on how the government reacts to the development, then the country may risk a crisis, which doomsayers paint along the contours of the Argentina debacle in 2002. And if the buck-passing that has characterized the reactions of the executive branch and the legislature is any indication, then the Philippines could indeed go the way of Argentina sooner or later.
Ah, but the President had declared ahead of the credit downgrade that the fiscal crisis was a thing of the past. This was an instance of crisis handling by wishful thinking. She did not get her wish. Instead she got a downgrade.
The President's declaration was characteristic of the way she handles relations with Congress. If she can't have her way, then she declares the crisis is past or on the way to resolution. When the finance department failed to totally upgrade the sin taxes because of the reservation of lawmakers, she beat a retreat and said that the watered-down version of the bill would do. Apparently, Standard & Poor's thinks otherwise.
Similarly, Congress has been acting in its typically queasy way in response to new tax measures proposed by Malacañang. It has either been politely stalling or outright rejecting any request for new or improved taxes. In short, it has been acting irrationally.
In the first place, there's no rational basis for Congress to reject offhand the tax measures proposed by the executive. Increasing the excise taxes on tobacco and liquor is only practical because both are sin products whose consumption must be regulated. In the same way, widening the value-added tax to cover lucrative professions is not only practical but fair.
Strictly speaking, widening the VAT coverage is not a new tax measure; it's merely improving on a tax measure and plugging the loophole.
While Congress frowns on new tax measures to stem the fiscal menace, it seems unwilling to cut its pork barrel. It passed the 2005 budget with nary a gesture to cut the representatives' P65-million and the senators' P200-million pork barrel.
Considering that the President enjoys comfortable majorities in both the Senate and the House of Representatives, it is unacceptable that she has gone about pulling the nation out of what she admitted to be a fiscal crisis in a manner that has been half-hearted and even clumsy.
The President's weak response to the threatening fiscal crisis has been tentative and clumsy, belying her claim that she's firmly in control together with her vast coalition. If she and the administration lawmakers fail to get their act together and bite the bullet, then they doom the entire nation. It's not as if she's powerless to stop the crisis. Indeed, what is she in power for?
If at all, the protracted fiscal crisis and the weak responses to it have unmasked the canker in our sovereignty -- a powerless leadership that obtains because the people in power don't know how and when to use power where and when it is needed. There is a crisis ahead and we are drifting into it.
posted by Dante at 12:48 AM
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