When President Duterte steps down in 2022, one of his legacies to the country would be a pool of debt amounting to P13.7 trillion.
The amount catapults the debt-to-GDP ratio to a 17-year peak, a direct result of the government’s near-term borrowings intended for containing the Covid-19 pandemic and stimulating the economy.
Between January and July of this year, the government has already scrounged from local and foreign sources some P1.86 trillion which is almost equal to total government borrowings for the past two years. In July, public debt obtained from the sale of treasury bills and bonds totaled P1.38 trillion, according to records from the Bureau of the Treasury. On the other hand, the sum of external borrowings from program and project loans and offshore bond issues reached P481.2 billion.
The country’s debts after the Duterte presidency would eclipse the P5.94 trillion combined debts of six presidents, starting from the P526 billion debt incurred during the 21.7-year reign of ousted dictator Ferdinand Marcos Sr.; P344.1 billion during Corazon Aquino’s 6.25-year term; P839.8 billion in Fidel Ramos’ six years in office; P955.9 billion in 2.58 years under Joseph Ejercito; P2.4712 trillion in Gloria Arroyo’s 9.42-year administration, and P808.6 billion in six years with Benigno Aquino III as president.
Don’t get me wrong. There is nothing inherently wrong in a country that borrows in order to preserve financial liquidity and fuel growth. For developed nations experiencing economic slowdown, taking out loans at low interest rates is more preferable than raising taxes. For developing nations such as the Philippines, doing so is an indispensable shelter for gaps in domestic resources and for implementing programs that can help reduce poverty and cultivate longer-term growth. But the caveat has always been: can the Philippines pay it back?
Borrowings are also good if the money is used judiciously. In our case, doubts persist in the way the coffers are being managed, in the face of alleged large-scale corruption being unearthed almost on a regular basis. Many view Duterte’s pronouncement that justice will be meted out on government officials suspected of “just a whiff” of corruption as a mere soundbite. They point out that the president has been quick in absolving his supporters of any wrongdoing, even before they undergo judicial proceedings. The tentacles of corruption seem to choke every government office: PhilHealth, Customs, Immigration…the list is just too long to enumerate here.
While saying that the country has already squeezed whatever is left in the budget for amelioration program for the pandemic, the Department of Environment and Natural Resources (DENR) has stealthily shipped dolomite rocks from Cebu to Manila, and crushed them into “white sand” to beautify Manila Bay. The approved budget of the Manila Bay Rehabilitation Program (Baywalk area) is P397.897 million, which costs the Filipino taxpayers around P795,000 per square meter. Compare this to the P25 million to P30 million average cost of a two-lane road per kilometer. Such amount could sustain a month’s social amelioration funding for almost 80,000 vulnerable families.
I believe that, at this point, we are a country living beyond our means. Time can only tell how we will eventually become unable to make good on our fiscal promises. If worse comes to worse, we will be hard put at borrowing more money to get ourselves out of the hole we ourselves dug.
“Debt is like any other trap,” the 19th century American author Josh Billings has said: “Easy enough to get into, but hard enough to get out of.” How hard? “To the extent that there is no such thing as zero external debt, and both the most and the least-developed countries in the world alike [and all those in between] today struggle more than ever under the burden of what they owe.”
When we borrow too much and too often, repayments of loans and interests weaken the objective for which these are intended for: enhancing economic productivity. Amassed debts are akin to a tax on the potential harvest of a nation: A huge portion of the funds that should have gone to education, health, infrastructure and such priorities, is allocated to paying back our lenders.
According to Finance Secretary Sonny Dominguez, the country already borrowed $8.83 billion from bilateral development partners and multilateral lenders, as well as the offshore commercial market, as of August 27, to finance the fight against the health and socioeconomic crises inflicted by the Covid-19 pandemic.
“Of the total amount, $5.98 billion is budget-support financing from the Asian Development Bank, the World Bank, the Asian Infrastructure Investment Bank, a development agency of France, and the Japan International Cooperation Agency. Meanwhile, we raised $2.35 billion from our latest global bond offering that fetched our lowest-ever coupon in the US dollar market. The remaining $496.36 million is composed of grant and loan financing from our development partners for various Covid-19-specific projects,” Dominguez said.
To Sonny Africa, executive director of the independent think-tank IBON Foundation, “fixing the political and economic damage that Duterte has wrought in the last four years is already a daunting task.” He says that the prospect of what another two years will bring is scary, he told Al Jazeera, as he warned that the Philippines “is in the worst crisis of joblessness and collapsing household incomes in its history.”
A London School of Economics-trained development expert said that instead of addressing basic fiscal and economic reforms—such as social protection, free land distribution and the reversal of a “regressive” tax system—Duterte’s economic managers are continuing with a “business-as-usual” stance.
There is obviously a valid issue to all these accusations. Money is being wasted when it goes to something unimportant, while the nation wallows in the physical, emotional, mental, and economic suffering wrought by the pandemic. By and large, critics are saying that the Wuhan virus has undressed the Duterte administration and exposed it for what it really is: “the best and the brightest in theatrics and cosmetics.”
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