POSTSCRIPT / June 26, 2012 / Tuesday


Philippine STAR Columnist

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Ill effects of Phl $1B loan to IMF explained

GMA PRE-PAID IT: The Aquino administration must tell the people that it is able to lend $1 billion to the International Monetary Fund, because then President Gloria Arroyo pre-paid in full in 2006 the country’s debt with the IMF.

The Bangko Sentral ng Pilipinas has justified the $1-billion loan to the IMF, saying it is good policy to help European economies in financial crisis before the problem worsens and engulfs other countries, including the Philippines.

While this explanation is well taken in some quarters, it is not enough to quell questions over the Philippines’ offering $1 billion to Europeans when Filipinos themselves, especially the poor, are in need.

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LAGOS NOTES: At this point, we yield to Ricardo B. Reyes, president of the Freedom from Debt Coalition. He said yesterday, among other things:

“News from the G-20 Meeting at Lagos, Mexico, last June carried an announcement from the International Monetary Fund that the Philippines is among 20 countries that pledged to increase the IMF fund to assist economies going bankrupt and stabilize the world monetary system.

“The Philippine pledge amounts to $1 billion. This is on top of earlier Philippine contributions that amounted to SDR (Special Drawing Rights) 163.8 million or about $251.5 million as of Dec. 31, 2011.

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N.A.B. FACILITY: “These Philippine commitments have become part of the IMF’s Financial Transaction Plan, a mechanism to finance its lending and repayment transactions through a transfer of foreign exchange from members with strong reserves to members which need to borrow.

“The Philippines has contributed to the FTP since 2010. The BSP prepaid all Philippine outstanding debts from the IMF in 2006, enabling it to make an early exit from the Post-Program Monitoring Arrangement and stop availing itself of IMF loans.

“By continuing to participate in the FTP and even increasing Philippine contributions to it, the BSP aims to enroll the Philippines to IMF’s New Arrangements to Borrow facility, a credit arrangement meant to forestall or cope with national or regional crisis situations that could impair the international monetary system.

“Normally, quota subscriptions from member countries are the IMF’s main source of financing, but in the wake of repeated national debt crises which triggered regional or more widespread financial contagion, the IMF set up the NAB as its main backstop or supplementary financing to quota resources in 1997, following the Mexican financial crisis.

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DEBT PROFILE: “The Philippines is very much in debt. Consolidated public sector debt (debts of the national and local governments and government-owned and-controlled corporations and government financing institutions) stood at P7.6 trillion as of end-2011.

“National Government debt is P5.07 trillion as of April this year. Of this amount, foreign debt is P2.06 trillion while domestic debt is P3.02 trillion.

“Around 60 percent of foreign loans and nearly 99 percent of domestic loans incurred by the national government are sourced from the financial markets through various types of financial instruments, such as Treasury bills and bonds.

“From this debt picture we can see why the Arroyo administration and the BSP could afford to exit from the IMF in 2006, aside from other factors that strengthen the Philippine foreign reserves like the increasing remittances from overseas Filipinos and the surge of capital flows in the direction of Southeast and East Asia.

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WHY THE IMF?: “To assist other countries and peoples in need is at the heart of global human solidarity and sound international relations. Helping thy neighbors, our kapwa, is also a deep-seated Filipino trait.

“The big question, however, is: BUT WHY GO THROUGH THE IMF? Considering the IMF’s track record, can it really help the bankrupt economies and distressed peoples of the Eurozone get out of the financial and economic rut?

“We raise this question because of the bitter experiences of the Philippines in the hands of the IMF and its partner, the World Bank. For more than four decades, successive Philippine governments and elite classes have allowed themselves, for reasons of colonial mentality, United States’ pressures and selfish gain, to accept IMF’s prescriptions to chart the economic development of our country.

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IMF IMPOSITIONS: “These IMF prescriptions, which became impositions, took our economy down the road of debt-driven development. The objectives and policy conditionalities of IMF loans were directed towards producing more for export markets abroad than satisfying the basic needs of our people and developing both homegrown industrial and agricultural strength and a robust domestic market.

“When a deep economic crisis struck in the early 80s, the IMF aggressively pushed the Philippines to adopt its structural adjustment program that sought to remove the developmental role of the State in the economy and give the upper hand to markets and the private sector.

“Policies to liberalize the economy, privatize state enterprises and deregulate vital industries like oil and power were relentlessly pursued. Land reform was pushed aside to promote big agribusiness and real estate. Wages and job security were sacrificed through labor flexibility schemers to attract private investors.

“Government subsidies to basic social services and agriculture were radically cut or removed. A full-blown neo-liberal program was put into motion especially after the Philippines joined the World Trade Organization.

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ILL EFFECTS: “The effects on our national economy and the welfare of our people have been devastating. Industry and agriculture have registered very sluggish growth with many industries disappearing.

“From a former rice exporter, the Philippines has become one of the world’s top rice importers. Unemployment and underemployment have risen under a regime of jobless growth. A large underclass of contractual and informal labor has become the majority of the working class and has given rise to huge colonies of poverty and homelessness in the cities.

“Poverty continues to rise in the rural areas where landlessness and lack of jobs persist, and where indigenous peoples reside. Around 22 percent of the country’s labor force – the educated, skilled and enterprising — are now abroad in search of jobs and a better future.

“IMF crisis interventions in other countries have been similar to the Philippine experience. The formula is to inject liquidity to troubled economies to meet their debt payments to private creditors, maintain capital account convertibility and prevent default.”

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(First published in the Philippine STAR of June 26, 2012)

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