{"id":10319,"date":"2020-10-04T15:04:45","date_gmt":"2020-10-04T07:04:45","guid":{"rendered":"https:\/\/www.ibon.org\/?p=10319"},"modified":"2020-10-12T14:39:47","modified_gmt":"2020-10-12T06:39:47","slug":"duterte-govt-just-cant-debt-enough","status":"publish","type":"post","link":"https:\/\/www.ibon.org\/tl\/duterte-govt-just-cant-debt-enough\/","title":{"rendered":"Duterte govt: Just Can&#8217;t Debt Enough"},"content":{"rendered":"<p>From the first Php20\nmillion loan of the First Philippine Republic approved by the Malolos Congress\nin 1898, it took almost 120 years for the national debt to reach Php6.1\ntrillion in 2016. The Duterte administration is going to more than double that\nin just six years to <a href=\"https:\/\/business.inquirer.net\/306588\/covid-19-impact-ph-debt-to-hit-p13-7t-in-dutertes-last-year-in-office\">Php13.7\ntrillion<\/a> in\n2022.<\/p>\n\n\n\n<p>The administration\nlikes to give the impression that debt is growing because of its COVID-19\nresponse efforts \u2013 but the numbers don\u2019t add up. <\/p>\n\n\n\n<p>What\u2019s really\nhappening is that the government is using the pandemic as a smokescreen to\nfinance its indulgences \u2013 infrastructure, militarism, debt, and lower taxes on\nthe rich. The other side of the coin is that the poor and middle class are made\nto pay for these indulgences through more and higher consumption taxes that\nstrain their already stretched incomes.<\/p>\n\n\n\n<p>At a deeper level,\nwhat\u2019s happening is that the structural weaknesses of Philippine semifeudalism\nare being laid bare. Domestic agriculture and Filipino industry are the\nfoundations of the economy and drivers of development. But decades of\nneoliberal globalization have eroded these so much that more and more\ndebt-financed public spending is needed to spur growth to give the illusion of\nprogress. <\/p>\n\n\n\n<p><strong>Debt It Be<\/strong><\/p>\n\n\n\n<p>Debt is soaring. The Bureau of the Treasury (BTr) recently reported that the national government\u2019s outstanding debt reached <a href=\"https:\/\/www.treasury.gov.ph\/wp-content\/uploads\/2020\/09\/NG-Debt_Aug2020_web.xlsx\">Php9.6 trillion<\/a> as of August 2020, or a Php1.9 trillion increase from the start of the year. This isn\u2019t the end of it though and debt is projected to reach <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/BESF\/BESF2021\/D3.pdf\">Php10.2 trillion<\/a> by yearend, then Php12 trillion in 2021, and Php13.7 trillion in 2022.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"q6jyk8yr-ch1-ng-outstanding-debt-2000-2022p-php-m\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>The situation seems a little better if we look at the debt as its equivalent share of gross domestic product (GDP). Looking at the government\u2019s debt obligations relative to the size of the economy adds a bit more context about the country\u2019s ability to pay.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"1jrz0k6w-ch2-ng-outstanding-debt-2000-2022p-of-gdp\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>Better, but still not good. As projected, the 59.9% debt-to-GDP ratio in 2022 will be the worst in nearly two decades since the <a href=\"https:\/\/www.treasury.gov.ph\/wp-content\/uploads\/2020\/09\/Debtindct_Rebases2020_August2020.xlsx\">65.7%<\/a> ratio in 2005 around the height of the Arroyo-era fiscal crisis. The ratio in 2022 will also be higher if the economy doesn\u2019t grow as expected either from the protracted global and national economic crisis or any political turbulence around the 2022 national elections. <\/p>\n\n\n\n<p>Debt is swelling because, using COVID-19 as an excuse, the Duterte administration is on the biggest borrowing spree in the country\u2019s history. It is set to borrow in its six years nearly as much as the five administrations before it did over 31 years. Its gross borrowings are set to reach <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/BESF\/BESF2021\/D1.pdf\">Php3 trillion<\/a> in 2020 aside from another Php3 trillion in 2021. <\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"rxywr97z-ch3-ng-gross-borrowings-2000-2022p-php-m\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>By the end of its term, it is projected to have borrowed Php11.22 trillion over 2017-2022. This is nearly as much as the Php11.25 trillion in accumulated gross borrowings in the entire post-Marcos period 1986-2016. Measured as a share of the economy, the Duterte administration\u2019s gross borrowings will reach a record 15.9% of GDP in 2020 which is over double the historical average to date of 6.5% and well above the previous peak of 11.8% in 1992.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"76pj1r0z-ch4-ng-gross-borrowings-2000-2022p-of-gdp\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p><strong>You Can\u2019t Always\nDebt What You Want<\/strong><\/p>\n\n\n\n<p>The economic managers\nsay that this is most of all driven by the government\u2019s COVID-19 response. But\nit isn\u2019t.<\/p>\n\n\n\n<p>A huge response is\ndoubtless urgent in terms of public health programs, social assistance to\nmillions of distressed families, and critical support to tens of thousands of\nfloundering micro, small and medium enterprises (MSMEs), as well as to\nchronically neglected farmers and fisherfolk. However, the government\u2019s\nresponse is actually pretty stingy.<\/p>\n\n\n\n<p>The administration\nonly allotted <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/GAA\/GAA2020\/COVID-19-Releases-for-COVID-19-with-particulars-14-September-2020.pdf\">Php389.2\nbillion<\/a>\nunder Bayanihan 1 (RA 11469) and then an even smaller <a href=\"https:\/\/www.officialgazette.gov.ph\/downloads\/2020\/09sep\/20200911-RA-11494-RRD.pdf\">Php165.5\nbillion<\/a>\nunder Bayanihan 2 (RA 11494) or a total of just Php554.7 billion. The sum is\nequivalent to less than one-fifth (18.5%) of the Php3 trillion in projected\nborrowing for 2020.<\/p>\n\n\n\n<p>Things are even worse\nin the proposed 2021 budget. The administration claims that there\u2019s Php203.1\nbillion to respond to the pandemic but this is bloated by the Php71.4 billion\nbudget for PhilHealth which is actually the exact same pre-pandemic amount in\nthe 2020 budget. Taking that away, there\u2019s at best really just <a href=\"https:\/\/www.officialgazette.gov.ph\/downloads\/2020\/09sep\/20200911-RA-11494-RRD.pdf\">Php131.7\nbillion<\/a> for\npandemic response under so-called universal health care. This is equivalent to\njust 4.4% of the Php3 trillion in projected borrowing for 2021.<\/p>\n\n\n\n<p>Which actually\nexplains why COVID-19 continues to spread. The Philippines has the <a href=\"https:\/\/www.thelancet.com\/journals\/lancet\/article\/PIIS0140-6736(20)31927-9\/fulltext\">worst<\/a> pandemic response in East and\nSoutheast Asia and among the worst in the world. The country also just earned\nthe dubious distinction of rising to among the <a href=\"https:\/\/www.facebook.com\/cprhPH\/posts\/1781112515376630\">top 20<\/a> countries with the most number of\ncoronavirus cases.<\/p>\n\n\n\n<p>And which also\nexplains why Filipinos are struggling today. There\u2019s the expensive COVID-19\ntesting and treatment. Millions of poor and low income households aren\u2019t\ngetting any aid and record numbers of families are going <a href=\"https:\/\/www.rappler.com\/nation\/hunger-philippines-sws-survey-september-2020\">hungry<\/a>. Business confidence is likewise\nsteeply dropping to record <a href=\"http:\/\/www.bsp.gov.ph\/downloads\/Publications\/2020\/BES_3qtr2020.pdf\">lows<\/a> which likely means many more MSMEs\nclosing and lay-offs rising well into next year.<\/p>\n\n\n\n<p>If the debt isn\u2019t for\nCOVID-19 response, then what is it for?<\/p>\n\n\n\n<p><strong>(I Can\u2019t Debt No)\nSatisfaction<\/strong><\/p>\n\n\n\n<p>The bloating debt is\nmost of all for the same distorted priorities the Duterte administration had\nbefore and upon the pandemic. Stubbornly elite-driven economic policymaking\ncontinues to serve the narrow interests of capital and self-serving political\nagenda.<\/p>\n\n\n\n<p>The economic crisis is crimping government revenues but imprudent expenditures are kept at record highs \u2013 resulting in record high deficits and correspondingly record high borrowings to cover these. <\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"31qxjxd1-ch5-ng-cash-operations-2000-2022-of-gdp\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>What are these\nmisguided expenses? There\u2019s the obsession with Build, Build, Build (BBB) which\nmakes contractors and real estate oligarchs even richer, swells the pork barrel\nof politicians, and gives foreign investors the infrastructure they want.\nPublic infrastructure spending is set at <a href=\"https:\/\/www.dbm.gov.ph\/index.php\/budget-documents\/2021\/2021-people-s-budget\/2021-budget-at-a-glance-proposed\">Php1.1\ntrillion<\/a> in\n2021.<\/p>\n\n\n\n<p>Ambitious\ninfrastructure spending is justified as some kind of magic bullet for growth.\nThis has been growing immensely in every year of the Duterte administration\nboth in absolute terms and as a share of GDP. But this still didn\u2019t stop the\neconomy from slowing, joblessness from worsening, and agriculture and industry\nfrom declining in the three years even before the pandemic hit.<\/p>\n\n\n\n<p>There\u2019s also the\noverspending on the military to bolster authoritarian rule and placate restive\ngenerals. Between 2020 and 2021, the budget of the defense department increases\nwhile the budgets of the health and social welfare departments see a decline\nfrom their Bayanihan 1- and Bayanihan 2-boosted spending this year.<\/p>\n\n\n\n<p>And there\u2019s debt service because the creditworthiness that the economic managers are so infatuated with doesn\u2019t come cheap. This has been growing for three years now and will rise steeply next year.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"8r9gd1eq-ch6-ng-debt-service-2000-2021-php-m\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>In 2021, the Duterte administration will be paying the most debt service in the country\u2019s history at <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/BESF\/BESF2021\/B17.pdf\">Php1.8 trillion<\/a> in interest and principal payments or equivalent to 8.1% of GDP. It\u2019s also equivalent to 66 centavos out of every peso of revenue (66%) \u2013 rising from 25.5% in 2018, higher than the historical average to date of 49.3%, and the highest in a decade.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"76pj1j37-ch7-ng-debt-service-2000-2021-of-gdp\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p>It can also be argued\nthat most of the borrowing will in effect just go to paying off debt. Debt\nservicing in 2021 will be equivalent to six-tenths of gross borrowing for the\nyear (59.3%), double the expected 33.5% this year. The economic managers argue\nthat this is essential to enable us to keep on borrowing \u2013 but then who really\ngains the most from that borrowing?<\/p>\n\n\n\n<p>The question can even be asked with regard to the supposed <a href=\"https:\/\/www.dof.gov.ph\/data\/fin-agreements\/\">financing<\/a> for COVID-19 response from some of the country\u2019s biggest lenders. The Philippines is getting US$7.5 billion worth of loans from five major creditors. These are lenders that the country already owes US$26.8 billion to and who we\u2019re actually paying US$3 billion in debt service this year and next.<\/p>\n\n\n\n<script src=\"\/\/my.visme.co\/visme-embed.js\"><\/script><div class=\"visme_d\" data-url=\"q6jyqy8w-t1-covid-lenders-2020-2021\" data-w=\"900\" data-h=\"550\" data-domain=\"my\"><\/div>\n\n\n\n<p><strong>Debt\u2019s Dance<\/strong><\/p>\n\n\n\n<p>The dance of\nborrowing to pay off debt to be able to keep on borrowing doesn\u2019t have to be so\nrecurring if only the government were able to raise more revenues. Unlike in\nthe 1980s debt crisis, overseas Filipino workers today provide abundant foreign\nexchange that can be used when paying foreign creditors.<\/p>\n\n\n\n<p>The most sustainable\nsource of revenues is a strong and vibrant economy. But this can\u2019t be created\nas long as so much debt goes to unproductive or ineffective purposes, and as\nlong as real structural economic reforms for the better aren\u2019t taken.<\/p>\n\n\n\n<p>Instead, past\ngovernments have always preferred to raise revenues by burdening the poor and\nmiddle class with consumption taxes like value-added tax (VAT) and excise\ntaxes. VAT was introduced in 1986 then broadened and expanded in 1997 and 2005.\nThese are convenient for government \u2013 because the mass of low-income consumers\nis obliged to pay taxes as long as they consume to survive \u2013 but grossly\nregressive.<\/p>\n\n\n\n<p>The Duterte\nadministration is no exception and, if anything, consolidates its\nrecord-breaking streak by crafting the most regressive tax system in the\ncountry\u2019s history. Its Comprehensive Tax Reform Program (CTRP) adds or raises\nindirect taxes on a wide range of consumer goods and services. <\/p>\n\n\n\n<p>Yet, just when\nrevenues are needed the most to avert a debt crisis, it is using the middle\nclass and MSMEs as a cover to even lower direct taxes on the rich and large\ncorporations. The TRAIN law passed in 2017 results in an estimated <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/BESF\/BESF2021\/C5.pdf\">Php584.0\nbillion<\/a> in\nrevenue losses over 2019-2022 from cuts in personal income, estate and donor\u2019s\ntaxes. The corporate income tax cuts in the proposed CREATE law in turn means <a href=\"https:\/\/www.dbm.gov.ph\/wp-content\/uploads\/BESF\/BESF2021\/C5.pdf\">Php249.4\nbillion<\/a> in\nrevenues lost over 2020-2022, mainly benefiting large corporations including\nforeign firms.<\/p>\n\n\n\n<p>The net result is that, more than ever, the poor and middle class disproportionately bear the burden of paying for colossal government debt while the rich accumulate even more income and wealth. The stratospherically wealthy are the best-off by this. In a more rational world, they would be paying higher income taxes and a substantial <a href=\"https:\/\/www.ibon.org\/tl\/upon-covid-19-time-to-tax-the-super-rich\/\">wealth tax<\/a>.<\/p>\n\n\n\n<p><strong>Debt Up, Stand Up<\/strong><\/p>\n\n\n\n<p>Speaking to a Senate\nunder the president\u2019s thumb, the finance secretary last month said that the\ngovernment will push for new or higher <a href=\"https:\/\/business.inquirer.net\/307964\/new-taxes-loom-before-duterte-steps-down-in-2022\">taxes<\/a> from now until 2022. The\ncompulsion is powerful because, with relentless wasteful spending, higher\ngovernment revenues are needed to keep paying creditors. This is the Duterte\nadministration\u2019s primary concern and not real social and economic development.<\/p>\n\n\n\n<p>In a very meaningful sense, the debt crisis is already upon us \u2013 just not yet the kind that the economic managers and creditors are worried about where debt payments to lenders are interrupted. Although the country is certainly much closer to that now than at the start of the Duterte administration.<\/p>\n\n\n\n<p>It\u2019s where the\ngovernment isn\u2019t spending to stop millions of Filipinos from suffering or for\nsocial services or for building the foundations of the domestic economy. With\ngovernment debt reaching dizzying heights, this will only get worse in the\nyears to come.<\/p>\n\n\n\n<p>The proposed 2021 budget is a case in point. In the middle of the worst public health crisis in the country\u2019s history, the public health system is allowed to deteriorate. Amid unparalleled economic decline, there is no aid for the people nor real support for distressed MSMEs. Teachers, staff and students are not getting the support to ensure quality education for all.<\/p>\n\n\n\n<p>The country\u2019s policymaking remains captured by self-serving political and economic interests and the only real pressure for change comes from the country\u2019s sectoral and grassroots movements. Save for some progressive lawmakers, Congress is merely going through the motions and rubber-stamping the executive\u2019s proposed 2021 budget \u2013 which means that the only sane voice against debt and for development comes from the <a href=\"https:\/\/www.facebook.com\/watch\/?v=337053747718822\">people<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"<p>BY SONNY AFRICA<\/p>\n<p>The debt crisis is already upon us \u2013 just not the kind that the economic managers and creditors are worried about where debt payments to lenders are interrupted.<\/p>","protected":false},"author":13,"featured_media":10361,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-withbanner.php","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":"","_expiration-date-status":"saved","_expiration-date":0,"_expiration-date-type":"","_expiration-date-categories":[],"_expiration-date-options":[]},"categories":[2048,3],"tags":[2366,2367,1041,2199,2273,978,1821,2368,347,574,2365,836,1259],"acf":[],"_links":{"self":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/10319"}],"collection":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/comments?post=10319"}],"version-history":[{"count":12,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/10319\/revisions"}],"predecessor-version":[{"id":10360,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/10319\/revisions\/10360"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media\/10361"}],"wp:attachment":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media?parent=10319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/categories?post=10319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/tags?post=10319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}