(Keynote Address delivered by REP. EDCEL C. LAGMAN at the 10th Congress of the Freedom from Debt Coalition at the College of Social Work and Community Development, University of the Philippines, Diliman, Quezon City on 22 November 2007)
Last week, just outside the south wing of the House of Representatives, an explosion killed four people, including a Representative, and injured 11 others. In memory of the dead and for the recovery of the injured, I ask for a moment of silence.
The day before this lethal explosion, and right inside the Plenary Hall of the House, there was a vital implosion, but without blinding light, without deafening sound, without searing heat. No one was killed, no one was injured. Its target was not one, two, or any number of Representatives. Its target was the most numerous among the represented. Its aim was not to kill and maim, but to rectify and vitalize.
Friends, fellow advocates of a society more just and less burdened by debt, on Monday last week, 12 November 2008, upon its approval on third reading by the House of Representatives, the debt-burdened national budget imploded. Or it was made to implode with the debt service on interest payments as the principal “casualty”.
The implosion broke up a big block of funds, the debt service fund. The chip that broke away, or was made to break away, was worth some P17.8 billion, together with the other parts of the proposed budget amounting to P16.138 billion or a total of P33.938 billion which were realigned to augment principally allocations for basic services on education, health and social development.
The implosion was followed by a re-building of the severed parts. What emerged was a more solid whole, pressed more tightly, more coherently, to more effectively serve the needs of the most numerous among those represented in the House: the absolutely poor, the relatively poor, the poorly educated, those with poor health, those whose chances of making a good life in this country are poor, those forced by poverty to flee to the remotest parts of the earth, there to do the most menial of jobs for employers of the host nations, all the while indebted and indented to their recruiters, relatives or employers. These are the Filipinos to be benefited by the implosion of the debt-burdened budget.
Thus, the P17.8 billion deleted from interest payments of certain foreign debts had been utilized partly to augment the budgets of:
- Education sector by P6.903 billion;
- Health sector by P6.812 billion;
- Public safety and security by P1.818 billion;
- Agriculture by P1.470 billion; and
- Social welfare and development by P612 million
The force responsible for this implosion was legislative action aided by popular intervention—in a budgeting process without precedent in the annals of the House.
Last September 28, instead of conducting a scheduled executive meeting, the House Committee on Appropriations, for the first time ever, invited people’s organizations, among them the Freedom from Debt Coalition, to hear their views on the proposed national budget for the ensuing fiscal year.
These views were contained in a document, entitled Alternative Budget 2008, that is now part of the official record of the Committee, and therefore of the House. You, as members of the Freedom from Debt Coalition, and all of your friends and colleagues in the NGO community who are also members of the Social Watch and the Alternative Budget Consortium, can pride yourselves in this official fact: your effort to spearhead popular intervention in the budget process is now part of our nation’s legislative history.
That unprecedented presentation before the Appropriations Committee last September helped the Committee find or confirm the resolve of the committee’s leadership as to which appropriations in the proposed national budget could be excised or reduced and which must be augmented, to make the budget a more effective instrument of public policy in favor of the needy.
The outcome of this subtraction and addition, the dagdag-bawas that is integral to the budget process in any democratic government, is the Committee proposal and the House approval of the reallocation of P33.938 billion in the proposed national government budget for 2008. If you are interested, a list of the appropriation items cancelled or reduced as well as those augmented, will be available soon.
How should we view this P33.938 billion budgetary reallocation? What is a reasonable perspective in matters involving Congressional scrutiny and authorization of the national budget?
The P33.938 billion may be a rather small amount. Indeed, it is a mere 2.77 percent of the proposed budget for 2008, which is P1.227 trillion.
But, we must remember that while the Constitution has vested Congress with the power to appropriate, the power to determine and authorize the use of public funds, the power to allocate such funds for specific purposes and to specific programs and projects, are subject to constraints under existing laws, especially the Revised Administrative Code and the Local Government Code. These legal constraints limit Congressional discretion over the proposed budget to only a small fraction of its total value.
That is why Congress has practically no power over proposed allocations for salaries and other expenditures under Personal Services, except to the extent that it has the power to create new positions in the government and allocate funds to cover these positions. In the case of the proposed 2008 budget, allocations for Personal Services or “warm bodies” has a total value of P384.8 billion, or 31.4 percent of P1.227 trillion.
That is why Congress has practically no power over the Internal Revenue Allotment for local government units, except to the extent that it has the power to amend the law, the Local Government Code, that provides for such mandatory allotment and its automatic release. But enacting the budget law, the annual General Appropriations Act, is not the measure for amending the Local Government Code. In the case of the proposed 2008 budget, the IRA is P210.7 billion, or 17.2 percent of P1.227 trillion.
Automatic appropriations other than debt service in the proposed 2008 budget totaled P49 billion, or almost 4 percent of P1.227 trillion.
Interest payments—as proposed to the House by the Executive—amounted to P295.8 billion, or 24.1 percent of P1.227 trillion. This is not to mention the amount of P328.341 billion which is earmarked for principal amortization which is off-budget.
What was left for the Committee and the House to consider was P139 billion in Maintenance and Other Operating Expenses and P148 billion in Capital Outlay, or a total of P287 billion, or just 23.4 percent of P1.227 trillion.
One way of looking at the P33.938 billion reallocation and augmentation made by the Appropriations Committee and approved by the House is to compare this amount to the amount over which the Committee and the House had discretion. Let us call this latter amount the discretionary budget. The Committee and the House reallocated the equivalent of 11.83 percent of the discretionary budget. It is up to you to say, on whatever basis you may want to cite, whether 11.83 percent is big or small.
I said, “the equivalent of”, not “11.83 percent of”. This is because the reallocation did not touch only the discretionary budget, as I defined it, but also what was supposed to be beyond the power of the House to touch: the fund for the payment of interest on the public debt. From the P295.8 billion allocation for interest payments, the Committee and the House slashed P17.8 billion, consisting of two portions, P6.8 billion representing savings and P11 billion representing payments for fraudulent, tainted and/or useless loans.
The Committee and the House deemed P6.8 billion unnecessary for debt service next year, on account of the stronger peso relative to the dollar, compared to the assumption made by the country’s economic managers of from P46 to P48 to the dollar.
The Committee and the House slashed P11 billion more from the proposed debt service fund, in consideration of what we may call the ethics of public debt. As many Filipinos know by now, thanks largely to the efforts of the Freedom from Debt Coalition, some if not many of our public debts were contracted with fraudulent intent, in some cases on both sides of the debt negotiating table. Many of such debts were contracted during the Marcos regime. Of the more recently contracted public debts, some, according to journalistic accounts and NGO reports compiled by the Freedom from Debt Coalition, were tainted, to the extent that the implementation of the programs and projects funded by them was reportedly attended by graft or fraud.
A lot of work needs to be done to make it legally feasible for these “illegitimate debts”, as the FDC calls them, to be renegotiated, condoned or cancelled. This work must begin soon. Otherwise, time will cancel whatever crimes or inequities might have attended these debts: one cannot ask for the renegotiation, condonation, or cancellation of debts already fully paid. The infamous and improvident Bataan Nuclear Power Plant loan which is now completely retired must spur us to begin the work soonest. This work will necessarily involve both the Executive and Legislative branches of the government. It is to initiate this necessary work that the Committee and the House inserted a Special Provision to govern the Debt Service-Interest Payment fund, in effect suspending interest payments, estimated at P11 billion, for the therein enumerated loans, among others.
The Special Provision reads:
“1. Use of the Fund. The appropriation of Two Hundred Seventy-Seven Billion Nine Hundred Fifty One Million Pesos (P277,951,000,000) authorized herein, and such additional amounts as may actually be needed, which shall be appropriated, shall be used for the payment of interest of foreign and domestic indebtedness. PROVIDED, That pending loan renegotiation and/or condonation, no amount shall be used for the payment of interest payments on debts which are challenged as fraudulent, wasteful and/or useless…”
The phrase “debts which are challenged as fraudulent, wasteful and/or useless” was deliberately crafted to be encompassing and does not require the filing or pendency of a litigation challenging the debt concerned. The word “challenge” is used in its generic sense. The “challenge” of FDC as part of its advocacy is enough to trigger suspension of payments of the loans enumerated in the Special Provision.
The intent of the Committee and the House in so suspending about P11 billion in interest payments, and this is clear in the Special Provision, was for the Executive to be moved toward reviewing, with the goal of renegotiating and ultimately canceling, some of our public debts.
The Special Provision is also intended to strengthen the case for the creation of an official body that will audit the country’s public debts and recommend solutions to whatever problems might be uncovered, the Joint Congressional Commission on the Public Debt contemplated in a Joint Resolution that I re-filed. Its predecessor was unanimously adopted by the House during the 13th Congress but found its graveyard in the Senate.
The P17.8 billion reduction in the Debt Service-Interest Payment fund is also an expression of the sense of the Committee and the House that funds subject to automatic appropriation under Section 26 of Book Six of the Revised Administrative Code, specifically interest payments, may nonetheless be subjected to Congressional scrutiny and that, if warranted, their amounts may be modified by Congress. This should be especially clear in the case of the P6.8 billion reduction in interest payments, which was made on the basis of economic facts available to the Committee and the House during their hearings and deliberations, but not appreciated by the economic managers when they made their macroeconomic assumptions on the foreign exchange rate relative to next year’s budget.
Furthermore, the reduction in debt service interest payments is the precursor for the repeal of automatic appropriation for debt repayments which I have likewise re-filed.
There is of course the rational expectation, or founded fear, based on the post-EDSA I history of the public debt problem, that the Executive, exercising a Constitutional prerogative and citing the national interest, just might undo what the Committee and the House have done with the Interest Payment fund. I do not want to speculate on veto and override. In the first place, the Senate has yet to come up with its own version of the budget, and it is not a fit subject for public speculation by a House Member what the Senate might or might not do with a pending bill.
However, it may not be improper or irrelevant to assume that the Senate will agree with what the House did with the proposed 2008 budget in general and the Interest Payment fund in particular. But, as I said, that is something that I would rather not speculate about—even as I have, of course, already speculated about it.
For that is part of the stuff of which policy-making, budgeting and social advocacy are made. One often has to speculate, but within reason, because sometimes the relevant facts reside in the future.
But these future facts are not completely outside the control or influence of those who wish these facts to coincide with their hopes.
This is, or must be, a truism for all of us here. Otherwise, we would not be around today.
Because, as I see it, we have been holding on to this proposition for the last twenty years.
Twenty years ago, you embarked on a mission to help this country unburden itself of the yoke of indebtedness. Twenty years ago, I began my own journey in the making of public policy, with the same goal, among others, starting with the debt cap bills and proposals to repeal automatic appropriations for debt service.
Today, as I for the third time address your national congress, and as you for the third time endure my presence, we can see that although our paths have been parallel, they have a tendency to converge.
That they should still converge now on the same old national problem, is a little discouraging. Twenty years of earnest effort has not brought us close enough to our goal.
But that they should still converge now on the same old national problem, is truly encouraging. Twenty years of frustrated and frustrating effort has not made us give up hope.
I’m hoping that our common hope will sustain us in our continuing effort to change some facts.
Because your mission is worth pursuing, my journey is worth undertaking.
I truly hope that the day would come, and soon enough, that the name of your organization – “Freedom from Debt Coalition” – will no longer be mocked by an expanding debt stock and an exploding debt service.
Liberation from public debt truly justifies FDC’s fighting shibboleth and enduring advocacy – freedom from debt!
Thank you.