The Philippines and the national government remain deeply indebted despite the US$1-billion loan extended by the country to the International Monetary Fund (IMF). According to research group IBON, statements including from Malacañang that the country is a “creditor nation” are inaccurate, public relations spin and distract from the reality of continuing underdevelopment and debt-dependence.
The country’s external debt still totaled US$62.9 billion as of March 2012 – US$79.1 billion if other debt monitored by the Bangko Sentral ng Pilipinas (BSP) but relegated to a footnote are included. Up to 77% of this, or US$48.3 billion, is owed by the government including the BSP. And while the country stopped being a net borrower from the IMF in 2006, it still has US$11.7 billion in multilateral debt including US$3.3 billion to the World Bank (WB) and US$6.0 billion to the Asian Development Bank (ADB).
Outstanding national government (NG) debt meanwhile has reached Php5.1 trillion as of April 2012 and Php2.1 trillion of this, or 41% of the total, is foreign debt. This huge debt is among the reasons why debt service takes is chronically the single largest expense of the government, for instance reaching Php738.6 billion in interest and principal payments just in 2012.
According to IBON, government may have wanted to give the impression that the Philippines is now able to lend the IMF US$1 billion because of its sound management of government finances and of the economy. However the international reserves are not really funds that the government has earned and can lend or spend in the same way as, for instance, its projected Php1.6 trillion in revenues for 2012. The international reserves are foreign exchange assets accumulated by the economy from various foreign exchange inflows, but which are not like money held by the treasury.
The Philippines has actually been lending to the IMF for decades now with an interest-earning reserve position that, for instance, rose from US$113.4 million in 2000 to US$516.83 million in May 2012. There has likewise been billions of dollars in other lending to foreign entities. The BSP has long had interest-earning deposits in foreign banks and held interest-earning foreign securities including from the United States (US). This lending rose from US$12.4 billion in 2000 to US$64.1 billion in May 2012.
These have sensibly not been played up in the past because such “lending” of foreign exchange is normal occurrences in the management of any country’s international reserves and are not equivalent to lending of surplus government cash. The recent hype about “creditor nation” status then appears part of a public relations campaign of a supposedly improving economy in the build-up to the next State of the Nation Address (SONA) at the end of July, the research group said. (end)