UNSUSTAINABLE and ILLEGITIMATE DEBT
Renewing efforts to bring national gov’t debt under public scrutiny and shift payments away from questionable loans to support people’s needs and survival
Manila, February 21, 2023 “Audit the debt now! Repeal the Automatic Appropriations Law”
The call to examine the public debt – a legacy of debt dependence by the Marcos Sr. administration and carried through by successive Philippine administrations – echoed from leaders and respected individuals coming together as a commission for the Philippine Citizens Debt Audit.
The national government debt now stands at P13.5 trillion, as last reported by the Bureau of Treasury. Through the Citizens Debt Audit, the commissioners aim to empower Filipinos to dig into our public debt, disentangling the web of unsustainable debt levels and the burden they impose on ordinary citizens.
Launched in Quezon City to examine the increasingly ballooning public debt of the country, they also pressed for the repeal of a Marcos Sr. law that allows automatic appropriation of funds for debt service, without benefit of public consultations and regardless of more urgent survival needs today of the Filipino people
Dr. Rene Ofreneo, current president of the Freedom from Debt Coalition (FDC) and Professor Emeritus of the UP School of Labor and Industrial Relations scored the Automatic Appropriations policy for curtailing citizens’ rights to information and participation in debt governance and management. “These public debts were and continue to be incurred in the name of the Filipino people. We are also the ones shouldering debt service payments, whether through taxes or cuts in public expenditures for health, education, job creation and other needs. Yet, we only get to know what debts were contracted after the deed is done, and then bear the consequences for debt-funded projects that may have violated human rights or destroyed environments.”
“Debt audits are critical towards shaping and transforming policies on outstanding debts and debt payments, as well as borrowing policies. They can also serve as bases to call for changes in the policies of lenders, ” said Lidy Nacpil, coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD). “Filipinos are struggling to survive in the face of multiple crises. Examining the public debt through a debt audit can identify loans that should not be paid, and open opportunities for shifting public money from debt service to people’s needs especially in these extremely difficult times.”
UP Professor Emeritus of Asian Studies Dr. Eduardo Tadem, former FDC president, shared the challenges and gains of the coalition in undertaking a Citizens Debt Audit and pushing for an Official Debt Audit. He noted milestones following years of debt audit campaigning, such as the inclusion of a special provision in the 2017 General Appropriations Act (GAA) signed by former President Duterte in December 2016 “to conduct a debt audit to determine the legitimacy” of 20 government-contracted foreign loans from the Asian Development Bank, World Bank and other lenders. These were among 481 outstanding foreign loans that were supposed to be probed under the Hontiveros-Pimentel initiative.
However, these efforts did not progress further for various reasons, notably the lack of political will, according to Tadem. He cited the veto powers of the President, which then President Gloria Macapagal-Arroyo exercised over a GAA special provision that would have suspended debt service for 13 foreign loans that the FDC called “illegitimate” or “fraudulent, wasteful, and/or useless.” Tadem said that “this is exactly why a Citizens Debt Audit is vital, for Filipinos to have the space to assert their democratic rights to information, to ask questions and be informed to take active part in policy-making on an issue that impacts their daily lives and their future. We need sustained public pressure to push for an official debt audit.”
As an example of a questionable loan, SANLAKAS Secretary General Atty. Aaron Pedrosa, presented the case of the New Centennial Water Source-Kaliwa Dam Project (NCWS-KDP), funded by a loan agreement with onerous conditions. These include costly repayment terms and a waiver of immunity by the Philippine government in case lenders file for arbitration. “This practically holds our sovereignty hostage,” said Pedrosa who further cited irregularities in the issuance of the Environmental Compliance Certificate (ECC) by the Department of Environment and Natural Resources and the Certificate Precondition issued by the National Commission on Indigenous People.
The controversial NCWS-KDP was initiated as a PPP project during the term of Pres. Benigno Aquino III but was later converted to an official development assistance (ODA) project by the Duterte administration with the Export-Import Bank of China providing funding for 85 percent of the project cost through a bilateral loan. Atty. Pedrosa is co-counsel of the petition for environmental protection filed by indigenous peoples to stop the construction of the Kaliwa Dam Access Road Project. The access road was found in violation of legal requirements and laws protecting the Dumagat-Remontado ancestral domain.
The commissioners plan to hold public consultations and publish reports in the coming months. In addition to Nacpil, Ofreneo, Tadem and Pedrosa, commission members include Bishop Gerardo Alminaza (Co-convenor, Withdraw from Coal Coalition); Maria Rosario Ballescas (Coordinator, Regional Center of Expertise on Education for Sustainable Development); Leody de Guzman (Chairman Emeritus, Bukluran ng Manggagawang Pilipino); Manuel Montes (Senior Advisor, Society for International Development); Maria Dulce Natividad (UP Asian Center Associate Professor); Eribert Padilla (Certified Public Accountant); Loretta Ann Rosales (Chairperson Emeritus, AKBAYAN Citizens Action Party); Flora Santos (President, Oriang national women’s movement) and Zyza Nadine Suzara (Executive Director, Institute for Leadership, Empowerment, and Democracy or I-Lead).
Mae Buenaventura - APMDD
Rovik Obanil - FDC
APMDD scores putting blame on borrowers, slams lenders' lack of debt transparency at 13th UNCTAD Conference
"We believe that debt transparency should apply to all debt instruments and countries, regardless of income levels... For certain, borrowing governments should be held responsible for contracting and accumulating burdensome and illegitimate debts. But transparency is just as wanting among lenders. In many instances, the weight of culpability and accountability rests primarily and heavily on lenders."
The message expressed by APMDD at the 13th UNCTAD Debt Management Conference held in Geneva last Dec. 5-7 drove home a key critique of lenders demanding debt transparency on the part of borrowers while conveniently excusing themselves from their own guidelines.
APMDD was represented by Mae Buenaventura of the Debt Justice Program in the panel that included Riccardo Boffo, Economist and Financial Analyst (OECD); Yuefen Li, Senior Adviser, South-South Co-operation and Development Finance (South Centre); and Sonja Gibbs, Managing Director and Head of Sustainable Finance, Institute of International Finance (IIF).
The Conference is held regularly as a biennial forum for sharing experiences and exchanging views between governments, international organizations, academia and civil society on debt-related developments in developing countries and on debt management issues in the broader macroeconomic context.
The most recent effort proceeds from the OECD Debt Transparency Initiative which principles drafted without public consultations by the IIF, a group for the financial industry and composed of the world's largest commercial and investment banks. International financial institutions such as the International Monetary Fund and the World Bank, the G20 and the OECD promote these guidelines, ignoring other sets of principles already in place. These include the UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing which benefitted from broad participation and consultation with civil society, among them APMDD, media, academe and other stakeholders.
Read the full intervention here.
"In 2018, our report History RePPPeated – How Public-Private Partnerships are failing challenged the increasing promotion of Public-Private Partnerships (PPPs) as a silver bullet to finance development projects. It showed that PPPs often come at a high cost for the public purse and citizens, an excessive level of risk for the public sector and have a negative impact on democratic governanceHowever, calls for an increasing role for the private sector in the financing of infrastructure and public services, and for PPPs in particular, continue to grow.
Currently, PPPs are being promoted through a vast array of tools and by a wide range of institutions, including bilateral donor agencies, United Nations agencies and multilateral development banks (MDBs). The World Bank Group continues to be at the forefront of the promotion of PPPs, and of the use of private finance in development more generally.
The rationale is that PPPs may help overcome challenges in the financing, implementation and delivery of infrastructure and public services, based on the assumption that the private sector brings additional finance, and that private companies are inherently more efficient than the public sector in delivering high-quality public services. This overlooks evidence that points to the contrary and the fact that decades of structural adjustment programmes and austerity policies have left public services underfunded.
This report is the second in the History RePPPeated series and is once again the result of a joint civil society effort from organisations around the world. Through emblematic cases across four continents, the report provides an in-depth analysis of various kinds of PPP projects in both the global south and north. It also analyses emerging trends in the intervening four years since the first report was published, particularly in light of the Covid-19 pandemic and the multiple crises facing the world.
Since then, the context for the continued promotion of PPPs has become even more complex and uncertain. In early 2020, the arrival of the Covid-19 pandemic highlighted how market-based models cannot be relied upon to deliver on human rights such as health, education and water provision, and the fight against inequalities. In 2022, the upsurge in the cost of living, the energy crisis and the climate crisis have further highlighted the failures of the current economic model and the urgent need to build a different one."
Read and download the full report here.
Read more here.
The Asian Peoples’ Movement on Debt and Development (APMDD) today joined hundreds of organizations worldwide participating in a global week of action to demand debt cancellation amid multiple crises as international lenders led by the World Bank and the International Monetary Fund (IMF) meet in Washington DC for their annual meetings.
Public actions in the Philippines, Nepal, Pakistan, Indonesia and India denounced the failure of lenders to heed the growing demand to cancel the debt in the face of skyrocketing prices of food and fuel and intensifying climate emergency.
Hundreds of Filipino activists marched to the Philippine Senate to call for immediate debt cancellation and the repeal of the Automatic Appropriations Law. Several participants each wore a mock ball and chain around their neck, symbolizing the increasing gravity of the country’s debt burdens.
Freedom from Debt Coalition (FDC) President Rene Ofreneo slammed a decree by the late Ferdinand Marcos Sr. that remains in place, which automatically prioritizes debt payments. “This is a legacy of the Marcos dictatorship that is grossly unjust and must immediately be repealed. The Filipino people do not even know what they are paying for, when these debts were contracted in their name. It’s time for a debt audit to weed out loans that did not benefit us at all. Surely, this is common sense that should be plain to all, not least the current President.”
He cited the record-high national government debt of PhP13.02 trillion as of August. “That’s about PhP127,000 of debt for each Filipino, which will be paid out of public funds at a time when public support for public basic services is urgently needed by our people,” Ofreneo lamented the additional $2 billion added to the Philippines’ debt bill when the newly-installed administration of Ferdinand ‘Bongbong’ Marcos Jr. sold its first global bond.
APMDD Coordinator Lidy Nacpil stated that the Philippines is one of many countries around the world caught in multiple crises of public health, economic recession and climate change. “Mounting debts mean mounting debt service, resulting in cuts to budgets for healthcare, and education, decent housing and other essentials. Burdensome debts are also stopping governments from decisively tackling the climate crisis,” said Lidy Nacpil, APMDD coordinator.
Nacpil cited Sri Lanka, Pakistan, Zambia, Lebanon and Ghana as the most recent examples. “Pakistan, in particular, which has recently experienced devastating floods because of the climate crisis, has seen 33 million people displaced. Yet the government is still expected to pay US$18 billion in debt payments to foreign lenders. This situation cannot continue.”
These are also countries that have been paying debt service and complying with structural adjustments and austerity conditionalities by lenders, despite the budget cuts these entailed in social spending. In Asia, unsustainable debt levels pile up with dire consequences for developmental needs such as in Sri Lanka which defaulted in May, and Pakistan where public funds continue to be siphoned into debt service.
Farooq Tariq, General Secretary of the Pakistan Kissan Rabita Committee said, “As humanitarian organizations scrambled for emergency funds, a familiar face reared its head once more. The IMF, recently approved a bailout request with a plan to release $1.1 billion to the country. At first glance, this may seem like a vital step in Pakistan’s recovery, but to pile further debt on a country already in the grip of a financial crisis will only end in greater disaster and injustice.”
Echoing the global call, protesters stressed that “we will not be held hostage by the lenders and global rule-makers who are leading us down a path towards greater inequality, impoverishment, deprivation and ecocide.” As public institutions, the IMF and the World Bank remain influential peddlers of loans among Global South countries and still fail to account for their responsibility in creating the vulnerabilities to pandemics, economic recessions and climate change.