The Philippine Debt Audit

Campaign
A Renewed Call to the 14th Congress
and the Filipino People

Presented by
Rebecca L. Malay
Treasurer, Freedom from Debt Coalition
The Debt Audit
 Congressional Debt Audit
 Where we are
 Moving forward: issues & considerations
 Citizens Debt Audit Commission
 Where we are
 General Concept
 Refinement in structure
 Proposed members of the Commission
Is the debt problem over?
Growing Debt Problem (in trillion pesos)
5.00

4.50
NG Contingent Liabilities
4.00
National Government (NG) Debts
3.50
Debt Service
3.00
Gross Borrowings
2.50

2.00

1.50

1.00

0.50

0.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Aquino Ramos Estrada Arroyo
Sources: Bureau of Treasury for NG Debts and Contingent Liabilities, Bangko Sentral ng Pilipinas on
Gross Borrowings, and Department of Budget and Management (General Appropriations Act) for Debt
Service
Record Breaker
Arroyo: Largest Borrowed, Largest Paid (in trillion pesos)

3.50
3.09
2.83
3.00

2.50 Gross Borrowings

Debt Payments 2.05
2.00

1.46
1.50

1.00 0.78 0.71

0.52 0.56 0.57
0.50 0.37

0.00
Aquino (87-92) Ramos (93-98) Estrada (99-00) T otal (Aquino, Arroyo (01-06)
Ramos, Estrada)

Sources: Bangko Sentral ng Pilipinas on Gross Borrowings, and Department of

Budget and Management for Debt Service
Is the debt problem over?
NG Outstanding Debt 3.819 National
Domestic Debt (by instruments) 2.148 Government
Treasury Bills 0.588 Debt as of
Treasury Bonds/Notes 1.538 end-May 2007
Loans 0.022
(in trillion
Others 0
pesos)
Foreign Debt (by creditors, using $1=P46.35) 1.671
Multilateral 0.251
Bilateral 0.378
Commercial 0.035
Foreign Denominated Securities 1.006

Source: Bureau of
NG Contingent Liabilities 0.530 Treasury, SDAD
Domestic Debt 0.072 Note: Breakdown of totals
may not sum up due to
Foreign Debt 0.458 rounding of digits
 Who pays?
Revenues vs. Debt Service (in billion pesos)
1,200

1,000

800 Revenues
Debt Servicing
600

400

200

0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Aquino Ramos Estrada Arroyo

Source: Bureau of Treasury for Revenues data, Department of Budget and Management for Debt Service data
Who suffers?
Government Expenditures 1987-2006 (in billion pesos)
800

700

600 Debt Service (Interest plus Principal)

500 Education

Health
400
Social Security

300

200

100

0
1988

1989

1991

1993

1996

1999

2002

2005
1987

1990

1992

1994

1995

1997

1998

2000

2001

2003

2004

2006
Aquino Ramos Estrada Arroyo
Who suffers?
 Social expenditures received the brunt of
expenditure cuts.
 Most evident during the time of Arroyo
 The gap between education expenditure and
debt service grew by 52.06% in 2002, the
highest in recent history
 Health and Social Security has not been a
priority for the longest time compared to debt
servicing
Education Spending*
 Average national spending for education by
administration show that based on 2000 prices, the
amount spent per pupil fell during Arroyo’s time
Marcos (1981-85) : Php 3 027
Aquino (1986-92) : Php 4 478
Ramos (1993-95) : Php 4 959
Estrada (1999-01): Php 5 830
Arroyo (2001-04) : Php 5 467

*former Budget Secretary Benjamin Diokno, “Real State of the Nation”, 20 July 2007
Health Spending*
 Combined (NG and LGU) per capita health
spending show that
Marcos (1981-85) spent Php 240
Aquino (1986-92) Php 278
Ramos (1993-98) Php 321
Estrada (1999-00) Php 360
Arroyo (2001-04) Php 303
*former Budget Secretary Benjamin Diokno, “Real State of the Nation”, 20 July
2007
Congressional Debt Audit
 The call for a Congressional Debt
Audit, calls for a comprehensive
investigation of all public sector debts
and contingent liabilities.
 Last Congress, the House of
Representatives swiftly passed the Debt
Audit Resolution, but the Senate failed to
take it up.
Congressional Debt Audit
 13th Congress: Review of engagement
Positive
 Unanimous approval of Passage
House Joint Resolution No. 1 in Sept
2004 through the efforts of Lagman,
Zialcita, progressive & minority solons
 Developed stronger support from
several minority senators – Pimentel,
Madrigal, Lacson through other
engagements
 Linked up for support with key staff
of LP Drilon wing
Negative
 Discussion of Senate version
blocked in the Committee of Finance
headed by Sen. Villar
 Sen. Biazon not keen on fighting it
out; opted to develop an alternative
bill creating a Debt Management
Office
 Sen. Enrile apparently unhappy
about Biazon’s eventual authorship of
the Senate version of the resolution
Congressional Debt Audit
 14th Congress: Opportunities & Challenges
OPPORTUNITIES
 Lagman’s continued commitment
to pursue the debt audit; other allies
also committed
 Senate dominated by opposition;
key allies in the HOR now in the
Senate (Escudero, A. Cayetano),
Trillanes
CHALLENGES
 Other issues such as charter
change may put the debt audit
agenda in the sidelines
 The Senate President opposes
Debt Audit Resolution
 Administration legislators
dominates the Lower House
Congressional Debt Audit
How to move forward: issues & concerns
1. Joint resolution vs Committee level audit
2. Role of Rep. Lagman – he has the capacity to once again
push for the passage in the Lower House, but the dynamics
between him and the Senate should be assessed
3. Authorship of Biazon of the Senate version; possible
author is Sen. Pimentel
4. How to handle Sen. Enrile?
5. How else to maximize the favorable composition of the
Senate?
Citizens Debt Audit
 Where we are
 Convened 36 individuals and political bloc
representatives as convenors of the Citizens debt
Audit in 2004
 Met three times in 2005; difficulty in convening in
2006 as a result of the political crisis
 FDC’s work since 2006 up to the present allowed it
to consolidate sectors (YAD), and expand support for
the debt audit initiative (Budget Consortium, ODA
Watch, GCAP, LnM, other anti-GMA, faith-based,
etc.)
Citizens Debt Audit Commission

General Concept
1. Critical examination of the Philippine public
debt based on:
 Data and existing studies by resource persons and
organizations
 Studies prepared by working groups and technical
teams to be organized by the Citizens Debt Audit
Commission
 Testimonies and inputs from affected communities,
sectors and people’s organizations
Citizens Debt Audit Commission
Mechanics of the study:
 The review and examination process will follow an outline of the
themes/topics. The presentations and discussions will be aimed at
establishing the over-all picture (data, trends, etc.) and answering
general and specific questions addressing the issues and problems
related to the themes/topics.
 Studies, data and testimonies will be presented to the
Commissioners and to the general public in Public Hearings. These
sessions will devote sufficient time for questions, clarifications and
open discussion.
 The Commissioners may also have smaller discussion-meetings with
resource persons, witnesses, working groups and technical teams.
Citizens Debt Audit Commission

2. Preparation and release of reports summarizing

the findings of the Citizens Debt Audit and
formulation of recommendations and options
based on the findings. Thematic reports with
corresponding recommendations will be issued
periodically as theme of the review is
completed. A comprehensive over-all report
with recommendations will be issued at the end
of the process.
Citizens Debt Audit Commission
Mechanics of the reports and recommendations:
 The draft report and recommendations for each theme
will be prepared by assigned commissioners together
with the working group(s), resource persons and
technical team concerned.
 The draft report will be presented to all the
commissioners in Public Forums to which the general
public may be invited. The findings and
recommendations will be openly debated in the
Forums
 The commissioners will finalize the
report/recommendations and submit it to appropriate
government entities, which may be done with people’s
participation (i.e. with accompanying mobilization). A
summary will be presented to the media in press
conferences
Citizens Debt Audit Commission
Themes and Topics
1. Overview of the Current Public Debt Situation
2. Overview of the Historical Development of the Philippine Debt
Problem Including:
 Global context
 Periods of Crisis, Policies implemented, Results
 History of Renegotiations and Debt Relief Schemes
 Critical Issues that Emerged
3. Borrowings – Laws, Policies, Regulations, Trends and Issues
4. Debt Payments - Laws, Policies, Regulations, Trends and Issues
5. National Government Debt – Overview, Trends and Issues
6. NG External Debt – BNPP (lessons)
7. NG External Debt – Project and Program Loans – outcome and
impact of the projects, terms and conditionalities
Citizens Debt Audit Commission
8. NG External Debt – Loan Conditionalities; Debt as Leverage for Adjustment
Programs; Relations with Multilateral Financial Institutions
9. Private Loans and Liabilities Assumed by the National Government; Behest
Loans; Brady Securitization Deal
10. Interest Rates – Trends and Issues
11. NG External Debt – Bonds - Trends and Issues
12. Government-Owned and Controlled Corporations (GOCCs) and
Government Financial Institutions (GFIs) Debts
 NAPOCOR debts, etc
13. Build-Operate-Transfer (BOT) Projects– Debts and Liabilities
14. NG Debt – Domestic Debt
15. Old Central Bank and Bangko Central

Other Topics for Background

1. Debt Relief, Debt Reduction Instruments and Options
2. Lessons and Experiences from Other Countries
Citizens Debt Audit Commission

Structure of the Commission

 Members of the Commission (not to exceed 20
individuals with established credibility & expertise)
 Organizing and presiding over the process;
 Taking the lead in the review, examination and
preparations of reports and recommendations;
 Ensuring people’s participation in the audit process
 Ensuring that the process is open and transparent
manner to the general public
 Finalizing the reports and recommendations
Citizens Debt Audit Commission
Structure (cont’n)
 Technical Committee
 composed of consultants and technical experts
 Thematic Committees
 composed of people’s organizations, NGOs and individuals to focus on
putting together studies on a particular theme or specific topic for the
audit process, to be submitted to the Citizens Debt Audit commission.
 will also work with assigned commissioner/s in the preparations of the
report and recommendations, which will eventually be presented and
discussed in public forums.
 Secretariat - events organizing, public information and media;
research and data base-building; administration and finance (start
with two staff)
Freedom from Debt Coalition (FDC) –
Philippines
http://www.freedomfromdebtcoalition.org
mail@freedomfromdebtcoalition.org
+63(02)9246399 (Tele-fax), +63(02)9211985

Thank you.