Monday, August 30, 2004 Ong: Window dressing amid the fiscal crisis By Ted Aldwin Ong
THE country today is in a deep fiscal mess. I remember writing about the worsening state of the country's economy to sink in months following the May 11 elections. That period is now.
Press Secretary Ignacio Bunye attempted to act like an economist in front of the media but he failed to justify the statements of GMA that the country is "in the midst of a fiscal crisis."
No press secretary can co-equal the calmness, composure, wit and fluency of Ignacio Bunye. He is tailor-made for the job but sad to say, his boss - President Gloria Macapagal-Arroyo, an economist before she entered politics, knows what she was talking about when she declared of an ensuing fiscal crisis. There is no need for Bunye to emphasize the real message behind Ms Arroyo's declaration. Bunye's justification was off the point.
The Freedom from Debt Coalition has been reminding the national government of a looming fiscal crisis for years already because of the ballooning debt and the widening budget deficit. The Philippine Daily Inquirer considered former Finance Secretary Jose Isidro Camacho as "the man who said it first" on the issue of financial crisis.
For me, Camacho was not the first to declare, but rather the first to deny of an ensuing financial crisis. Civil society organizations have been alarmed on the rate of the country's debt for a long time but nobody cared about it. Now almost all legislators are dropping comments on the issue to earn cookie points. FDC urgently reiterates that the debt crisis is right here, right now. No amount of window dressing could hide that fact.
Last July, the FDC Debt Team presented the real score behind the fiscal crisis as result of the country's ballooning debt in a statement "Window Dressing: Good Practice Put to Bad Ends" "The government recently tried to suggest, in so many words, that the country's debt problem is not as bad as it seems. Apparently, the International Monetary Fund (IMF) discovered a flaw, quite belatedly, in the government's accounting methods. The official line is that the IMF has recommended a "new way" of computing the country's outstanding Public Sector debt."
Furthermore, the Public Sector debt was hitherto computed simply as the total of the National Government (NG) debt and the debts of the Government Owned and Controlled Corporations (GOCCs). In actual fact, the NG has outstanding debts with the GOCCs, and vice versa. These "intra-governmental borrowings", the IMF said, must not be included in the total public sector debt. In accounting and bookkeeping practice, this is not something new. It is simply correct practice. All this time, the government has been doing otherwise."
This government is now using this fortuitous mistake to paint a less bleak picture of the country's financial straits. It says the computational revision could reduce the Public Sector debt by as much as P1 trillion, making it "less worrisome". It says that the revision would "substantially" decrease the ratio of the Public Sector Debt to Gross Domestic Product (GDP) from 137.5 percent to "only" 111.2 percent (for 2003).
This is window dressing, pure and simple. It is making the economy look good on paper. Yet the debt crisis is not about figures and percentages. It is about reality and its harsh effects on the economic health of the nation. Reducing the debt figures will not reduce the hard cash being appropriated for debt servicing annually. Reducing the figures will not reduce the actual budget deficit. It will not make the fiscal crisis go away.
A country is in crisis when its total debt exceeds its annual income (the GDP). A country is in crisis when it has a P197.8-billion deficit (23% of the national budget) because it has to pay P271.5 billion in loan interests alone. A country is in crisis when it has to cut back on basic services spending to channel its resources to debt payments. A country is in crisis when its P542-billion principal and interest obligations (for 2004) take up nearly half of its projected expenditures for the whole year. A country is in crisis when it has to borrow everything it needs to pay for these obligations.
Who says that the country is not in deep financial crisis? Definitely, not GMA or Press Secretary Ignacio Bunye can deny that. FDC renews its call for the repeal of the automatic appropriations law for debt service, the public audit of all government debts, the repudiation of all illegitimate, fraudulent, behest and onerous loans, the institution of a ceiling on debt payments, and the regulation of government borrowings, loan guarantees and performance undertakings.
The government must confront the crisis squarely and honestly. It must confront the crisis with full disclosure to the people who stand to suffer its consequences and its solutions.
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