Debt relief, as Bono of U2 would sing it, would be "The Sweetest Thing." The singer has been campaigning for the leading creditors of the world to grant debt relief to the poorest nations in the world. Pope John Paul II has also been pushing for the Jubilee 2000 Debt Campaign which, following the Biblical accounts of Jubilee celebrations, included removing the debt burden of the poor. Taking his cue from the Pope, Filipino businessman Ricardo Quintos has initiated a campaign for the condonation of interest payments on the country's foreign debt.
As of June this year, the foreign debt of the Philippines totaled US$52.16 billion. This translates to an indebtedness of US$695.52 or about PhP37,776 for each of the 75 million Filipinos, young and old alike. To a Bracket 9 student of the University of the Philippines, this amount can pay three years' worth of tuition fees. In 1999, the government paid US$2.5 billion, or an equivalent to US$6.8 million daily on interest payments alone. That was PhP264.0 million daily in peso terms using the PhP39.09:US$1 average exchange rate in that year.
The country's current debt load has increased 33% from the 1995 level of US$39.37 billion. It is now equivalent to 64% of the Philippine gross national product (GNP) or the total market value of all goods and services produced in the country. The ratio has slightly improved, though, from 69.5% in 1998 during the height of the Asian financial crisis (See Table 1).
Table 1: Philippine External Debt, 1995 - June 2000
� 1995 1996 1997 1998 1999 Jun-00 External Debt (US$ million) 39,367 41,875 45,433 47,817 52,210 52,164 As % of GNP 51.7% 48.5% 53.0% 69.5% 64.7% 64.0%
Debt servicing. The average entry-level salary of a fresh grad is PhP8,000 to PhP10,000. He owes the world three to four months' worth of pay. While his payslip will not reflect a deduction saying "RP foreign debt service," he pays for it through taxes and the social services that he cannot enjoy because the government has to allocate more of its budget for debt servicing or principal and interest payments on its loans.
Section 26(b) of the Revised Administrative Code of 1987 stipulates that the government has to give priority to debt servicing although this might mean cutting down the budget for social services and infrastructure. Since 1996, the government has paid no less than US$5 billion a year for debt servicing (see Table 2) and no less than PhP2.2 billion on interest payments alone.
Table 2: Debt Service Burden(In million US$)
� 1996 1997 1998 1999 Total 5,026 5,596 5,095 5,999
Principal 2,820 3,029 2,838 3,534
Interest 2,206 2,567 2,257 2,465
Of the PhP651 billion government budget for 2000, PhP109.3 billion or almost 17% was appropriated for debt servicing. (View Chart).
Meanwhile, allocation for social services totaled PhP221.7 billion, PhP165.6 billion went to economic services, PhP121.3 million to PhP general public services, and PhP32.7 billion for defense expenditures. Although social services accounted for the biggest chunk at 34%, this is still below the 40% standard set by the United Nations Development Program.
Although education received the largest chunk of the social services expenditures, note that its 2000 budget allocation of PhP118.0 billion is only slightly higher than that of debt servicing. Actually, the share of education to the national budget even decreased to 18.12% this year compared with 19.9% in 1998 and 19.2% in 1999 (see Table 3). Meanwhile, funding for social services such as health care, social security, and housing and community development have also been kept to a minimum so the government can pay off its loans (View Chart).
These three combined would only account for 35.8% of the debt service appropriation for 2000. The PhP5.9 billion budget for housing and community development can only build 33 mansions for PhP180 million each for privileged mistresses.Table 3: Social Services Expenditure Program Levels(in billion pesos) % Share to Total NG Budget 1998 1999 2000 1998 1999 2000 Education, Culture and Manpower Dev't. 106.9 113.7 118.0 19.9 19.2 18.1 Health 13.5 15.0 14.7 2.5 2.5 2.3 Social Security, Welfare and Employment 22.8 24.4 27.2 4.2 4.1 4.2 Housing and Community Dev't. 2.8 3.2 5.9 0.5 0.5 0.9 Land Distribution (Agrarian Reform) - 2.5 5.3 0.0 0.4 0.8 Other Social Services 0.7 6.0 5.6 0.1 1.0 0.9 Subsidy to Local Government Units 28.5 35.8 45.1 5.3 6.0 6.9 TOTAL 175.2 200.6 221.8 32.6 33.8 34.1
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