Overview on the Fiscal and Debt Crisis (work in progress) Lidy B. Nacpil Freedom from Debt...

Overview on the Fiscal and Debt Crisis

(work in progress)

Lidy B. Nacpil

Freedom from Debt Coalition

FISCAL CRISIS

FISCAL From the latin word “fiscus” meaning

PURSE or TREASURY INCOME - revenues from taxes, tariffs,

non-tax, (borrowings) SPENDING - budget and off-budget

expenditures (and other disbursements)

SIGNS OF THE FISCAL CRISIS

NATIONAL BUDGET DEFICIT -- increasing sharply since 1998 1998 (9.30%) 1999 (19.24%) 2000 (19.67%) 2001 (21.02%) 2002 (28.40%) 2003 (24.89%) 2004 Projected (22.88%)

NATIONAL GOVERNMENT EXPENDITURES_DEFICIT 1990 - 2004

1990 1991 1992 1993 1994 1995 1996

71,114 74,922 79,571 76,491 79,123 72,851 76,522 77,971

NG Expenditures 223,473 248,679 262,042 276,859 330,203 372,081 416,139

(37,194) (26,349) (15,966) (21,891) 16,286 11,074 6,255

-16.64% -10.60% -6.09% -7.91% 4.93% 2.98% 1.50%

1997 1998 1999 2000 2001 2002 2003 2004Programmed

NG Expenditures 491,783 537,433 580,385 682,460 699,878 742,022 811,562 864,763

Overall Surplus / (Deficit) 1,564 (49,981) (111,658) (134,212) (147,100) (210,741) (202,000) (197,816)

0.32% -9.30% -19.24% -19.67% -21.02% -28.40% -24.89% -22.88%

Source of figures: Department of Budget and Management

(In million pesos)

P A R T I C U L A R S

Overall Surplus / (Deficit)

Suprlus/ (Deficit) as % of Total Expenditures


Suprlus/ (Deficit) as % of Total Expenditures

NG Expenditures v- a- v Deficit & Revenues

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

NG Expenditures Overall Surplus / (Deficit) NG Revenues

FACTORS THAT LED TO THE FISCAL CRISIS

THE DEBT -- The problem of the DEBT is the biggest factor that led to the crisis

FALLING REVENUES

THE PROBLEM OF THE DEBT

The Debt has been a major problem for the Philippine for more than two decades.

The TOTAL DEBT of the Philippines is composed of the following:

– Public Debt – government borrowings

– Private Debt – private corporations and private entities

This is a classification based on the borrowers

It is the PUBLIC DEBT that is immediately relevant to the Fiscal Crisis but the Private Sector Debt has also an important impact on the economy as a whole.

Public sector debt as of end December 2003 is 5.9 trillion pesos – about 130% of GDP (Source: Department of Finance)

Debt is also classified based on creditor:

– FOREIGN or EXTERNAL– DOMESTIC

Thus we have PUBLIC DEBT – external/foreign and domestic

(Private Debt is also both external/foreign and domestic)

Foreign Debt or External Debt is debt owed in foreign currency to foreign creditors such as:

– Multilateral Financial Institutions IMF and World Bank

– Bilateral Creditors Governments and their financial institutions

– International and Foreign Commercial Banks

– Foreign buyers of Phil Government issued bonds and other similar instruments

Domestic debt is debt owed to Philippine creditors and includes those in Pesos as well as dollar-denominated loans:

– Buyers of Treasury Bills and Bonds and other similar instruments

– Philippine Banks and other Financial Institutions

Structure of the Public Sector Debt

National GovernmentForeign and Domestic

14 Monitored GOCCsForeign and Domestic

– Central Bank / CB-BOLForeign and Domestic

– Bangko SentralForeign and Domestic

– Government Financial InstitutionsForeign and Domestic

Less GOCC Onlent or Guaranteed by NG

14 Monitored GOCCs Home Guaranty Corporation

Light Rail Transit Authority

Local Water Utilities Administration

Metropolitan Waterworks & Sewerage System

National Development Company

National Electrification Administration

National Food Authority

National Housing Authority

National Irrigation Administration

National Power Corporation

Philippine Economic Zone Authority

Philippine National Oil Company

Philippine National Railways

Philippine Ports Authority

Government Finance Institutions (GFIs)

Al Amanah Islamic Investment Bank of the Philippines

National Home Mortgage Finance Corporation

Development Bank of the Philippines

Land Bank of the Philippines

Philippine Crop Insurance Corporation

Trade & Investment Development Corporation of the Philippines

The Debt is not only a problem of the Philippines – it a problem of more than 100 countries. Previously referred to as Third World countries, they are now called “the South” or South countries.

The emergence of the global debt problem – a short review of history

Philippine debt started ballooning in the 1970’s:– in 1970: outstanding Foreign debt stood at $2.3 billion;

$1.1 billion of which was public debt– By 1979: $13.35 billion -- $7.65 billion public debt– By 1985: US$ 26.25 billion -- $19.12 billion public debt

The Philippines went through a major debt crisis in the 1980’s, when NG debt payments (principal and interest) were claiming from 30% to 50% of the national budget.

In the 1990’s the Philippine debt was declared as “manageable” or “sustainable” by the IMF and World

Bank, a claim echoed by the Philippine government.

This was after the Brady securitization program was implemented (Philippines, Argentina, Brazil and several other countries who went through a debt crisis in the 1980’s)

Brady Plan – conversion of a large part of short-term commercial debt in longer term bonds

This declaration of “manageable” or “sustainable” debt was extremely unfortunate. The Philippine government went into “denial” mode and became complacent.

Even when the debt was considered sustainable – NG debt payments were still claiming a big share of the national budget – average of 20%, and this was only interest payments. (Payment of NG debt principal became an off-budget item in 1993).

The outstanding debt continued to grow at a fast rate. From 1993 to 2002, growth was more than double.

In the 1980’s, the main problem was FOREIGN DEBT.

Eventually, public domestic debt grew, as the Philippine government and related institutions borrowed domestically to be able to service the foreign debt. The big increase also took place when access to international credit was limited.

At one point, more than half of public debt was domestic debt.

At the present time, the ratio is about 50-50.

Domestic External Total

1993 1,260.70 652.10 1,912.80

1994 1,289.20 660.20 1,949.40

1995 1,453.60 713.50 2,167.10

1996 1,502.60 734.60 2,237.20

1997 1,586.90 1,082.40 2,669.30

1998 1,721.20 1,230.30 2,951.50

1999 2,196.60 1,469.70 3,666.30

2000 2,542.00 1,855.20 4,397.20

2001 2,286.30 2,125.10 4,411.40

2002 2,765.40 2,397.30 5,162.70

Outstanding Public Sector Debt 1993 to 2002 in Php billions

Outstanding Public Sector Debt (% of total for the Year) Domestic External

1993 65.91% 34.09%

1994 66.13% 33.87%

1995 67.08% 32.92%

1996 67.16% 32.84%

1997 59.45% 40.55%

1998 58.32% 41.68%

1999 59.91% 40.09%

2000 57.81% 42.19%

2001 51.83% 48.17%

2002 53.56% 46.44%

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Outstanding Public Sector Debt(in Php Billion)

External

Domestic

These figures are in Philippine pesos. But since foreign debt is owed in foreign currencies, any change in foreign exchange rates means an automatic change in the Phil peso value of the foreign debt.

A closer look at the Public Debt

Breakdown of PUBLIC SECTOR DEBT as of the year 2002 is the following


Total* 2,765.4 2,397.4 5,162.8

National Government 1,492.3 1,914.9 3,407.2

14 Monitored GOCCs 895.7 474.4 1,370.1

Central Bank/CB-BOL - 67.1 67.1

Bangko Sentral 164.3 450.4 614.7

Gov’t Financial Institutions 234.2 153.4 387.6

(* Already less: GOCC Debt Onlent or Guaranteed by NG) 21.1 662.8 683.9

2002 Outstanding Public Sector Debt (in Php Billion) Source: Dept of Finance

2002 Outstanding Public Sector Debt (in % of Total)


Total 100% 100% 100%

National Government 53.55 62.57 58.27

14 Monitored GOCCs 32.14 15.5 23.43

Central Bank/CB-BOL - 2.22 1.14

Bangko Sentral 5.89 14.71 10.51

Government Financial Institutions 8.4 5.0 6.62

Less: GOCC Debt Onlent or Guaranteed by NG

Outstanding Public Sector Debt(Year end, in Billions of Pesos)

Particulars 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Total Public Sector 1/ 1912.8 1949.4 2167.1 2237.2 2669.3 2951.5 3666.3 4397.2 4411.3 5162.7 Domestic 1260.7 1289.2 1453.6 1502.6 1586.9 1721.2 2196.6 2542 2286.3 2765.4 External 652.1 660.2 713.5 734.6 1082.4 1230.3 1469.7 1855.2 2125.1 2397.3(US$ billion) 23.5 27 27.2 27.9 27.1 31.5 36.5 37.1 41.3 45.2

National Government 2A/ 1268.8 1227.5 1325.5 1331.8 1624 1800.4 2142.2 2648.8 2880.7 3407.2National Government 2B/ 1074.2 1028.1 1103.1 1107.3 1282.9 1421.1 1692.5 2074 2302.3 2723.3 Domestic 2/ 682.1 670.6 724.6 748.3 757.3 859.6 986.7 1080.7 1270.9 1492.3 External 3/ 586.7 556.9 600.9 583.6 866.7 940.8 1155.5 1568.2 1609.8 1914.9(US$ billion) 21.2 22.8 22.9 22.2 21.7 24.1 28.7 31.4 31.3 36.1

14 Monitored GOCCs 4/ 268.6 269.9 343.2 453.3 622 643.9 930.9 1118.7 1139.9 1370.1 Domestic 139.1 147.3 205.9 312.1 436 419.1 644.8 810.6 744.9 895.7 External 129.5 122.6 137.2 141.1 186 224.8 286.1 308.1 395 474.4(US$ billion) 4.7 5 5.2 5.4 4.7 5.8 7.1 6.2 7.7 8.9

Central Bank/CB-BOL 5/ 59.6 81.1 82.6 77.1 112 102.2 74.9 81.8 73.9 67.1 Domestic External 59.6 81.1 82.6 77.1 112 102.2 74.9 81.8 73.9 67.1(US$ billion) 2.2 3.3 3.2 2.9 2.8 2.6 1.9 1.6 1.4 1.3

Bangko Sentral 5/ 209.3 240.9 253.8 332 301.9 387.5 492.8 587.8 593.8 614.6 Domestic 173.6 183.9 185.8 227.1 126.29 123.3 193.5 202.6 118.3 164.3 External 35.7 57 68 104.9 175.65 264.2 299.3 385.2 475.5 450.4(US$ billion) 1.3 2.3 2.6 4 4.4 6.8 7.4 7.7 9.2 8.5

Government Financial Institutions 301.1 329.4 384.5 267.6 350.5 396.8 475.2 534.9 301.4 387.5 Domestic 271.1 293 343.5 221.4 275 327.9 379.9 460.6 175.3 234.2 External 30 36.6 40.9 46.2 75.4 68.9 95.3 74.3 126.1 153.4(US$ billion) 1.1 1.5 1.6 1.8 1.9 1.8 2.4 1.5 2.5 2.9

Less: GOCC Debt Onlent orGuaranteed by NG 6/ 194.6 199.4 222.4 224.6 341.1 379.3 449.7 574.8 578.4 683.9 Domestic 5.2 5.6 6.2 6.2 7.7 8.7 8.3 12.5 23.2 21.1 External 189.4 193.8 216.2 218.3 333.4 370.6 441.4 562.3 555.2 662.8(US$ billion) 6.8 7.9 8.2 8.3 8.3 9.5 10.9 11.2 10.8 12.5

MEMORANDUM ITEMSExchange Rate (P/US$1) End of Period 27.7 24.42 26.21 26.29 39.98 39.06 40.31 50 51.4 53.1 Average 27.12 26.42 25.71 26.22 29.47 40.89 39.09 44.19 50.99 51.6NG Debt Stock/GNP % 76.10 59.20 56.30 49.00 50.70 50.70 54.00 59.30 58.80 63.50 NG Domestic Debt % 45.50 38.60 37.00 33.10 30.00 30.70 31.50 30.90 32.40 34.80 NG External Debt % 39.10 32.10 30.70 25.80 34.30 33.60 36.80 44.80 41.10 44.60Public Sector Debt Stock/GNP 1/ % 127.50 112.30 110.60 98.90 105.60 105.30 116.90 125.70 112.60 120.30 Public Sector Domestic Debt 1/ % 84.00 74.20 74.20 66.40 62.80 61.40 70.00 72.70 58.30 64.50 Public Sector External Debt 1/ % 43.50 38.00 36.40 32.50 42.80 43.90 46.90 53.10 54.20 55.90

1/ Includes National Government, 14 monitored GOCCs, CB/BOL/BSP and GFIs

2/ Includes direct, assumed and contingent liabilities

2A/ Includes direct, assumed and contingent liabilities

2B/ Excludes onlent and contingent/guaranteed liabilities which have not been assumed

3/ Includes direct, guaranteed and assumed liabilities

4/ Includes borrowings relent/guaranteed by NG

5/ Liabilities less currency issue and intergovernment accounts

6/ Includes relent, guaranteed and contingent liabilities

7/ Per GOCC and GFI submissions

NA/ Not Available

Source: Department of Finance

National Government Debt

The outstanding NG debts as of The outstanding NG debts as of February 2004 in Philippines February 2004 in Philippines pesos is 3,407,109,000,000 pesos is 3,407,109,000,000 (trillion).(trillion).

The Outstanding NG debt figures in The Outstanding NG debt figures in Philippine pesos for the years 1999 to 2004: Philippine pesos for the years 1999 to 2004:

1999 – 1,775,356,000,000 (trillion)1999 – 1,775,356,000,000 (trillion)

2000 - 2,166,710,000,000 (trillion)2000 - 2,166,710,000,000 (trillion)




2004 - 3,407, 109,000,000 (trillion)2004 - 3,407, 109,000,000 (trillion)

National Government Outstanding Debt

I. DOMESTIC

A. NG Direct

B. Assumed Liabilities

II. FOREIGN

A. Direct

B. Assumed

C. NG Foreign Bonds


I. DOMESTIC

A. NG Direct Govt. Securities Agencies Relent

B. Assumed Liabilities PNB DBP NPC/PNPP PGC NDC PAL


II. FOREIGN

A. Direct Agencies Relent

B. AssumedPNBDBPNPC/PNPPPGCNDCPAL

C. NG Foreign Bonds

National Government Outstanding Debt 2004(In Million Pesos) Source: Bureau of Treasury

Particulars 2004 (Feb)

TOTAL 3,407,109

I. DOMESTIC 1,755,330 NG Direct 1,753,033 Govt. Securities 1,737,472 Agencies 15,561 Relent -

Assumed Liabilities 2,297 PNB - DBP 2,291 NPC/PNPP - PGC 6 NDC - PAL -

II. FOREIGN 1,651,779 Direct 808,897 Agencies 696,295 Relent 112,602

Assumed 6,961 PNB 48 DBP 1,168 NPC/PNPP 5,432 PGC - NDC 271 PAL 42

NG Foreign Bonds 835,921

* Breakdown of totals may not sum up due to rounding Foreign Exchange rate used US$ = P 56.25

National Government Outstanding Debt 1999 to 2004(In Million Pesos)

Particulars 1999 2000 2001 2002 2003 2004 (Feb)

TOTAL 1,775,356 2,166,710 2,384,917 2,815,468 3,355,108 3,407,109

I. DOMESTIC 978,404 1,068,200 1,247,683 1,471,202 1,703,781 1,755,330 NG Direct 958,035 1,049,083 1,233,825 1,462,950 1,701,484 1,753,033 Govt. Securities 918,292 1,033,542 1,218,508 1,447,341 1,685,924 1,737,472 Agencies 39,732 15,541 15,317 15,609 15,560 15,561 Relent 11 - - - - -

Assumed Liabilities 20,369 19,117 13,858 8,252 2,297 2,297 PNB 6,006 5,590 3,842 1,979 - - DBP 13,967 13,159 9,761 6,138 2,291 2,291 NPC/PNPP 389 362 249 129 - - PGC - - - - - 6 NDC 6 6 6 6 6 - PAL - - - - - -

II. FOREIGN 796,952 1,098,510 1,137,234 1,344,266 1,651,327 1,651,779 Direct 541,477 647,468 626,958 705,414 815,942 808,897 Agencies 458,667 554,794 544,375 613,292 702,521 696,295 Relent 82,810 92,674 82,583 92,122 113,421 112,602

Assumed 13,122 13,472 11,631 9,815 7,985 6,961 PNB 359 329 244 152 56 48 DBP 2,174 2,163 1,831 1,592 1,349 1,168 NPC/PNPP 9,890 10,443 9,091 7,673 6,260 5,432 PGC - - - - - - NDC 438 462 401 342 272 271 PAL 261 75 64 56 48 42

NG Foreign Bonds 242,353 437,570 498,645 629,037 827,400 835,921

* Breakdown of totals may not sum up due to roundingForex Rate Used 40.250 49.950 51.500 53.050 55.550 56.250 Source: DMAD-BTr

IMPACT of the NATIONAL GOVERNMENT (NG) ON THE FISCAL CRISIS

The NG debt payments (interest and principal) is the biggest contributing factor to the current fiscal crisis.

Payments on interests on the NG debt have been claiming a large portion of the NG budget for a long time, crowding out spending for other items.

It is the largest item in the NG Budget, and the % has been increasing in recent years. In 2004, it is larger than all Social Service items combined.

Interest payments and principal payments of the NG debt is equivalent to 80% of 2004 revenues; For 2005 – debt payments are projected to be equivalent to 95% of revenues.

Secotral Allocation og NG Budget 1993 - 2004

0

50,000

100,000

150,000

200,000

250,000

300,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ECONOMI C SERVI CES SOCI AL SERVI CES DEFENSE GENERAL PUBLI C SERVI CES DEBT SERVI CE (I NTEREST)

NG EXPENDITURESIn Millions of Pesos

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ECONOMIC SERVICES 64,691 85,076 102,443 105,400 131,779 129,394 139,205 167,216 141,236 151,255 164,108 155,924% of total for the year 23.37% 25.76% 27.53% 25.33% 26.80% 24.08% 23.98% 24.50% 20.18% 20.38% 20.22% 18.03%

SOCIAL SERVICES 64,732 77,300 99,985 122,864 158,864 175,152 192,838 212,982 217,217 230,495 235,568 248,252% of total for the year 23.38% 23.41% 26.87% 29.52% 32.30% 32.59% 33.23% 31.21% 31.04% 31.06% 29.03% 28.71%

DEFENSE 20,002 23,125 27,493 30,978 29,212 31,512 32,959 36,208 32,782 38,907 40,645 43,191% of total for the year 7.22% 7.00% 7.39% 7.44% 5.94% 5.86% 5.68% 5.31% 4.68% 5.24% 5.01% 4.99%

GEN. PUBLIC SERVICES 48,294 59,686 65,613 79,215 92,576 101,254 105,900 122,526 120,019 132,878 134,944 140,365% of total for the year 17.44% 18.08% 17.63% 19.04% 18.82% 18.84% 18.25% 17.95% 17.15% 17.91% 16.63% 16.23%

NET LENDING 2,649 5,893 3,696 1,161 1,381 329 3,193 2,634 7,023 2,626 5,500 5,500% of total for the year 0.96% 1.78% 0.99% 0.28% 0.28% 0.06% 0.55% 0.39% 1.00% 0.35% 0.68% 0.64%

INTEREST PAYMENTS 76,491 79,123 72,851 76,522 77,971 99,792 106,290 140,894 181,601 185,861 230,697 271,531% of total for the year 27.63% 23.96% 19.58% 18.39% 15.85% 18.57% 18.31% 20.65% 25.95% 25.05% 28.43% 31.40%

TOTAL 276,859 330,203 372,081 416,140 491,783 537,433 580,385 682,460 699,878 742,022 811,462 864,763% of total for the year 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

SURPLUS/DEFICIT (21,891) 16,286 11,074 6,255 1,564 (49,981) (111,658) (134,212) (147,100) (210,741) (202,000) (197,816)

% of TOTAL EXP. -7.91% 4.93% 2.98% 1.50% 0.32% -9.30% -19.24% -19.67% -21.02% -28.40% -24.89% -22.88%(target)

Source: Various DBM Publications

Trends on Debt Payments and Deficits 1990 - 2004

1990 1991 1992 1993 1994 1995 1996

NG Expenditures / Budgetted 223,473 248,679 262,042 276,859 330,203 372,081 416,13971,114 74,922 79,571 76,491 79,123 72,851 76,522

as % of Expenditures 31.82% 30.13% 30.37% 27.63% 23.96% 19.58% 18.39%

Principal Amortization 35,232 46,560 29,651 36,887 38,845 64,517 41,220TOTAL DEBT PAYMENTS 106,346 121,482 109,222 113,378 117,968 137,368 117,742

58.79% 55.02% 45.00% 43.54% 35.09% 38.03% 28.69% as % of NG Budget+Principal Pymnts 41.11% 41.15% 37.44% 36.14% 31.97% 31.46% 25.74%

Revenues 180,902 220,787 242,714 260,405 336,160 361,220 410,450Revenues as % of Expenditures 80.95% 88.78% 92.62% 94.06% 101.80% 97.08% 98.63%Source of Raw Data: Department of Budget and Management

1997 1998 1999 2000 2001 2002 2003 2004Programmed

NG Expenditures 491,783 537,433 580,385 682,460 699,878 742,022 811,562 864,763Interest Payments 77,971 99,792 106,290 140,894 181,601 204,267 223,200 271,531 as % of Expenditures 15.85% 18.57% 18.31% 20.65% 25.95% 27.53% 27.50% 31.40%

Principal Amortization 47,678 64,717 99,106 86,949 99,605 172,098 243,582 270,660TOTAL DEBT PAYMENTS 125,649 164,509 205,396 227,843 281,206 376,365 466,782 542,191

26.63 35.57 42.92 44.26 50.38 66.36 79.92 80.78 as % of NG Budget+Principal Pymnts 23.29 27.32 30.23 29.61 35.17 41.17 44.24 47.75

Revenues 471,843 462,516 478,503 514,762 558,218 567,141 584,062 671,194 Revenues as % of Expenditures 95.95% 86.06% 82.45% 75.43% 79.76% 76.43% 71.97% 77.62%Source of Raw Data: Department of Budget and Management

as % of NG Revenues

(In million pesos)


as % of NG Revenues

Interest Payments


Total Debt Payments v- a- v NG Revenues; NG Budget + Principal Amortization 1990-

2004

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

TOTAL DEBT PAYMENTS Revenues NG Budget + Principal

THE AUTOMATIC APPROPRIATIONS LAW ON DEBT PAYMENTS

Marcos Presidential Decree 1177

Institutionalized by Pres. Aquino in the Administrative Code

Debt payments as the highest priority in government spending

THE PROBLEM OF REVENUES

The other factor to the crisis is the problem of revenues.

Growth of revenues has been slowing down in the last few years:– 1997 financial crisis – affecting growth and

correspondingly tax collection– aggressive trade liberalization since 1995– problems of efficiency in collection, tax avoidance

and evasion


Aggressive trade liberalization since1995– 1995 to 2003 – value of imports grew by

41.1%– but customs collections of import duties

declined by 35.7%


Growth of expenditures has also slowed down since the late 1990’s but it is growing faster than revenues.

NG Expenditures v- a- v Deficit & Revenues

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

NG Expenditures Overall Surplus / (Deficit) NG Revenues

NG Tax_NonTax Revenues 1990 -2004(In million pesos)

180,902 220,787 242,714 260,405 336,160 361,220 410,450 471,843

Tax Revenues 151,700 182,275 208,706 230,170 271,305 310,517 367,895 412,165

Nontax Revenues 29,202 38,512 34,008 30,235 64,855 50,703 42,555 59,678

Source: Bureau of the Treasury

22.05% 9.93% 7.29% 29.09% 7.45% 13.63% 14.96%

11.28% 5.37% 5.65% 19.27% 12.68% 11.84% 18.18%

462,516 478,503 514,762 558,218 567,141 584,062 671,194

Tax Revenues 416,585 431,687 460,034 498,880 496,372 530,774 601,392

Nontax Revenues 45,931 46,816 54,728 59,338 70,769 53,288 69,802Source: Bureau of the Treasury

-1.98% 3.46% 7.58% 8.44% 1.60% 2.98% 14.92%

9.28% 7.99% 17.59% 2.55% 6.02% 9.36% 6.57%

REVENUES

Growth of Revenues from Previous year

Growth of expenditures from previous year

Growth of Revenues from Previous year

Growth of expenditures frm Previous year

2000

REVENUES

PARTICULARS

1996 1997

1998 1999 2001 2002 2003 2004

1992 1993 1994 19951990 1991PARTICULARS

The major solution of previous governments to the problem of huge debt payments and the growing deficit has been to BORROW and to KEEP ON BORROWING.

Levels of borrowing has increased dramatically since 19980.

And by borrowing more and more, the government gets deeper and deeper in debt.

BUDGET DEFICIT FINANCING, 1981 - 2000(In million pesos) Source: Bureau of the Treasury

1980 1981 1982 1983 1984 1,985 1,986 1987 1988 1989 1990 1991

A. 5,067 12,403 10,541 8,097 35,899 15,779 35,461 58,618 47,339 37,210 30,096 64,722

B. 3,055 6,724 5,387 7,684 5,069 3,704 9,769 15,420 17,290 19,953 24,406 23,086

19,127 15,928 15,781 40,968 19,483 45,230 74,038 64,629 57,163 54,502 87,808

Less: Amortization 3,619 2,805 3,150 22,964 6,952 13,201 32,920 25,299 28,503 35,232 46,5603,055 6,724 5,387 4,096 2,715 2,329 4,621 4,051 3,973 4,843 6,021 8,340

C. 4,530 15,508 13,123 12,631 18,004 12,531 32,029 41,118 39,330 28,660 19,270 41,248

Interest Payments 3,583 3,897 3,560 4,997 10,409 14,652 21,612 36,905 45,865 54,714 71,114 74,922

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

A. 148,146 (16,992) 4,620 58,653 62,584 (2,430) 105,311 160,450 145,330 211,081 235,989 290,283

B. 34,143 38,223 12,285 16,833 21,955 22,995 48,302 120,354 145,434 58,284 200,267 240,122

182,289 21,231 16,905 75,486 84,539 20,565 153,613 280,804 290,764 269,365 436,256 530,405

Less: Amortization 29,651 36,887 38,845 64,517 41,220 47,678 64,717 99,106 86,949 99,605 172,098 243,582

C. 152,638 (15,656) (21,940) 10,969 43,319 (27,113) 88,896 181,698 203,815 169,760 95,309 81,285

Interest Payments 79,571 76,491 79,123 72,851 76,522 77,971 99,792 106,290 140,894 181,601 204,267 223,200

Gross Domestic Borrowings

Gross Foreign Borrowings

TOTAL Gross

Net Borrowings

Gross Domestic Borrowings

Gross Foreign Borrowings

TOTAL Gross

Net Borrowings

NG Foreign and Domestic Borrowings 1986-2003(In million pesos)

Cory Aquino Fidel Ramos Joseph EstradaGloria ArroyoPARTICULARS 1986-1991 1992-1997 1998-2000 2001-2003

(6 years) ( 6 years) (3 years) (3 years)

A. Gross Domestic Borrowings 273,446 254,581 411,091 737,353

B. Gross Foreign Borrowings 109,924 146,434 314,090 498,673

C. Total Borrowings 383,370 401,015 725,181 1,236,026

Source: Bureau of the Treasury

Interest Payments 305,132 462,529 346,796 609103

Principal Amortization 181,715 258,798 250,772 439,434

Total Payments 486,847 721,327 597,748 1,048,537

NG Domestic and Foreign Debt Per Administration

0

200000

400000

600000

800000

1000000

1200000

1400000

1986-1991 1992-1997 1998-2000 2001-2003

In M

illio

n Pe

sos

Domestic Foreign Accumulated Debt

1986-1991Cory Aquino

1992-1997Fidel Ramos

1998-2000Joseph Estrada

2001-2003Gloria Arroyo

486,847

721,327

597,748

1,048,537

383,370 401,015

725,181

1,236,026

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Borrowings and Debt Payments per Administration

Total Borrowings Total Payments

1986-1991Cory Aquino 1992-1997

Fidel Ramos 1998-2000Joseph Estrada 2001-2003

Gloria Arroyo

486,847

721,327

597,748

1,048,537

181,715258,798

250,772

439,434

305132

462529

346976

609103

0

200000

400000

600000

800000

1000000

1200000

Debt Payments Per Administration

Interest Payments Principal Amortization Total Payments

1986-1991Cory Aquino 1992-1997

Fidel Ramos 1998-2000Joseph Estrada 2001-2003

Gloria Arroyo

383,370 401,015

725,181

930,279

109,924146,434

314,090

385,306

273,446254,581

411,091

544,973

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Borrowings per Administration

Gross Domestic Borrowings Gross Foreign Borrowings Total Borrowings

Contingent Liabilities

WE SHOULD ALSO LOOK INTO THE PROBLEM OF CONTINGENT LIABILITIES which include:– Sovereign guarantees to debts– Risk guarantees to BOT projects

In 2002, the WB estimate of contingent liabilities is 3.2 trillion pesos.

HOW DO WE ADDRESS THE FISCAL CRISIS?

We cannot solve the problem of the fiscal crisis simply by measures to increase revenues.

Cuts on wasteful spending is imperative, but not enough to make up for the deficit.

Cutting down on other items will seriously affecting basic services and important economic programs. As it is, we are not spending enough on education, health, housing, agrarian reform etc.

We cannot continue to borrow at the same rate or even higher because it only brings us deeper into debt.

HOW DO WE ADDRESS THE FISCAL CRISIS?

Steps need to be taken to cut debt payments and reduce the outstanding debt.

THE PROBLEM OF ONEROUS and UNJUST DEBTS

The problem of the debt is more than the amounts : debts from onerous transactions debts with unjust terms debts tainted with bribery and fraud debts that financed disastrous and

damaging projects debts of private corporations that the

public is paying for debts of the dictatorship

International creditors should share in the burden, especially those who were accomplices in onerous loan transactions and contracts.

Private corporations, international and domestic, who were party to grossly disadvantageous debt-creating transactions and contracts must also share the burden. (ex. IPP contracts)

Private corporations and individuals whose debts we are paying for must also share the burden. (behest loans)

Past and present government officials must be held accountable for unjust, onerous and fraudulent debts, and debts wasted on corruption

Our people should not be made to pay for debts that cannot be justly considered their debts

We urgently call for a THOROUGH INVESTIGATION and AUDIT of PUBLIC DEBT and CONTINGENT LIABILITIES as a necessary and vital step towards a comprehensive and long-term solution to the problem of the debt.

Objectives of the DEBT AUDIT

Correcting flaws and weaknesses in the structures, policies and processes related to borrowings, payments, guarantees and contingent liabilities

Stronger, more comprehensive, coherent and consistent laws and regulations, and transparent and accountable oversight and regulatory mechanisms on public borrowings, public guarantees and contingent liabilities

Objectives of the DEBT AUDIT Developing a more judicious, accountable

and transparent debt payments policy that

upholds the Philippine national interest and the Filipino people’s rights and welfare as paramount

upholds national sovereignty over the public resources, restores the full power of the purse to Congress, and ensures democratic processes and transparency in determining debt payments

upholds the provision in the Constitution that states Education should have the highest priority in the National Budget

Objectives of the DEBT AUDIT

results in substantial reduction in the current level of allocations for debt service

addresses the issue of illegitimate debts > debts involving onerous terms and transactions, fraudulent claims & representations, the circumvention of laws & democratic processes, the financing of projects that have damaging effects on the environment, violates human rights &/or results in the massive displacement and dislocation of people and communities

takes into account creditor responsibility and accountability

OTHER IMMEDIATE STEPS Repeal of Automatic Appropriations

Law Non-payments of illegitimate and

onerous debts such as the BNPP debts Cancellation/annulment of onerous

agreements and contracts – ex. NAPOCOR Contracts with Independent Power Producers

Allocation of Education Budget to serve as reference point for a ceiling on debt payments

Overview on the Fiscal and Debt Crisis (work in progress) Lidy B. Nacpil Freedom from Debt...

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Transcript of Overview on the Fiscal and Debt Crisis (work in progress) Lidy B. Nacpil Freedom from Debt...