Cabinet Secretary Leoncio B. Evasco Jr. is open to the petition of Freedom from Debt Coalition (FDC) to stop the automatic appropriations for debt servicing in the annual national budget, officials of the FDC said on Monday.
FDC President Eduardo C. Tadem said Evasco assured them of his support, for any initiative will redound to the benefit of poor Filipinos, he being the designated “antipoverty czar” of the Duterte administration tasked to coordinate the various government offices mandated to eliminate poverty, hunger and unemployment.
“The message that he told us is that he is supportive of any initiative, which will benefit the poor Filipinos, regardless of the consequences,” Tadem told the BusinessMirror.
These consequences include a possible downgrading of the Philippines’s credit rating, which was upgraded to the minimum investment-grade status during the Aquino administration by the three big credit-rating agencies Fitch Ratings, Moody’s Investors Service and Standard & Poor’s.
But Tadem said the high credit rating of the Philippines is “artificially created” by the law, which mandated the automatic appropriation of debt servicing in each year’s budget.
He called on Congress to repeal such automatic appropriation to allow about one-third of the annual budget for use in other activities that can stimulate the economy, such as spending in infrastructure and promoting the social welfare of the poor.
FDC National Secretariat member Malu A. Mendoza said Evasco was agreeable to the proposal to stop automatic debt servicing, but referred the matter to the proper government agencies, such as the Department of Budget and Management (DBM) and the Department of Finance (DOF).
On Monday FDC members held a rally in Malacañang and sought a dialogue with Evasco, as the antipoverty czar, to lobby for the Executive branch’s support for their call to stop the automatic appropriation for debt servicing so the money can be used instead for social programs.
In the 2017 budget, some P385 billion of the budget is already allocated for interest payments alone, while more than P500 billion is allocated to service the principal debt. This brings the total budget for debt service to close to P900 billion, making debt servicing the third-biggest item in the budget, next to the budget for education and infrastructure.
Automatic debt servicing is mandated by a provision under Section 26B of Book VI of the 1987 Revised Administrative Code, which was copied from Presidential Decree 1177 of former President Ferdinand E. Marcos.
“This law should be repealed by Congress, and we’re asking the Executive branch to support us in our cause to make it easier to effect the repeal of the said law,” Tadem said.
Tadem added that another reason the government should stop automatic debt servicing is the fact that much of the country’s debt servicing is for debts that can be considered as illegitimate because it is fraught with corruption or fraud.
“This is why our government should conduct an audit first if which debts were contracted for legitimate projects and which were contracted for illegitimate projects so that we could have a moratorium on payments for these loans the proceeds of which went to the illegitimate projects,” he said.