Ibon
Urges Arroyo: Stop Foreign Debt Payments This
year's budget shortfall -- projected at P145 billion by yearend -- can be
substantially trimmed if government defaults on the P130-billion debt
interest payments slated for this year, says Ibon. The Arroyo administration should stop foreign debt
interest payments this year instead of looking for more foreign loans and
new taxes to solve the budget deficit problem. This was the unsolicited advice of Ibon
Foundation to President Gloria Macapagal-Arroyo, who marked her
first month in office early this week. The huge budget gap is seen as one
of the biggest threat to the country's economic recovery. Ibon, an independent socioeconomic research and policy
institution, pointed out that this year's budget shortfall -- projected at
P145 billion by yearend -- can be substantially trimmed if government
defaults on the P130-billion debt interest payments slated for this year. However, Ibon noted that with the current government's
adoption of last year's
General Appropriations Act (GAA), Malacaņang is expected to continue
fulfilling its foreign debt interest
commitments. But this can be prevented if Arroyo shores up
"enough political will" to instruct the next Congress to strike
out the expensive item, Ibon said. Congress will reconvene in July to
draft a new GAA for the second half of the year. Debt interest payments corner a huge chunk of the
national budget. As in last year's budget, the amount allotted for debt
interest payments account for 20% of this year's national budget. "By continuing to pay foreign debt interest at
P130 billion, the government will be shelling out an amount to foreign
creditors that is three times bigger than the combined allotment for
education, health and agriculture this year," said Ibon research
director Antonio Tujan. "If the Mexican government was able to do it in
the late 1990s when they experienced a financial crash, then maybe the
pragmatic economist in Mrs. Arroyo can also stand up to our creditors and
do the same," argued Tujan. "Besides, IBON's proposal does not
include defaulting on principal debt amortization - which was what Mexico
did!" The P130 billion still does not include principal debt
amortization, which has been taken out of the annual budget deliberations
since 1995. "So, although it would appear that debt service
budget had been on a downward trend, it should be noted that since 1995,
payment for principal debt has been excluded in the GAA items," added
Tujan. As of June last year, the country's foreign debt stood
at US$53.2 billion. This means each Filipino owes foreign creditors almost
P35,000. Various peoples' organizations like the party list
group Bayan Muna are asking
the Arroyo regime to repeal the automatic appropriation scheme for debt
service. Instead, the funds should be rechanneled for basic services. #
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