Cancel debt, World Bank dared

Cancel debt, World Bank dared

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Written by Cai Ordinario / Reporter

Business Mirror, 30 June 2009 00:43

IF the World Bank wants to help the country survive the global economic recession, it should “walk the talk” and begin the process of debt cancellation, according to the Freedom from Debt Coalition (FDC). In a statement, the FDC said on Monday that due to the automatic debt-service law, and the government underspending amid low revenues and unabashed borrowings to fill in the deficit, the possibility the country will sink into a recession is becoming clearer. The FDC said that of the country’s total debt stock, $2.54 billion or P122 billion is owed to the International Bank for Reconstruction and Development (IBRD), or the World Bank. “We are scheduled to pay $299 million to World Bank this year, or about P14.15 billion, of which P9.8 billion will go to interest payments alone. Imagine the results our country can achieve if the P122-billion WB debt is canceled and used to fund development programs and projects,” said FDC secretary-general Milo Tanchuling. “International financial institutions like the World Bank can help highly-indebted countries like the Philippines by starting to act like a development institution rather than a commercial bank and by canceling loans it is claiming from us,” continued Tanchuling. The FDC said if the WB would indeed start the process of debt cancellation, it can also start with auditing its own loan-financed projects. The group said one loan that should be audited is the loan for the Second Social Expenditure Management Program (SEMP2) and the Small Coconut Farms Development Project (SCFDP). The SEMP2 was funded by a $100-million World Bank loan, around $40 million of which was earmarked for the procurement of 17.5 million Social Studies textbooks and teachers’ manuals for public elementary and high schools. “The project allegedly underwent a rigged bidding process involving a monopoly and was reported to have produced at least 600,000 defective textbooks,” said the FDC. The group said officials from both the administration and the opposition already called for an inquiry into the SEMP2, of which the Philippines is scheduled to pay $5.5 million or P260 million as interest payment. The SEMP2 loan payments run until April 15, 2019. The group referred to the SCFDP as “the original fertilizer scam,” and it was financed by a $121.8-million by the World Bank on June 4, 1990. The group said around 40 percent of the funds intended for the project’s fertilizer deliveries had been reported to be malversed, with the Commission on Audit raising questions on insufficient documentation on the distribution of fertilizers. The FDC said the Philippines is scheduled to pay a total of $11.46 million or P540 million, both for interest and principal, for the SCFDP loan this year. The loan will be paid until September 15, 2010. “If it was able to investigate the case of NRIMP [National Roads Improvement and Management Project] 1 and 2, then it can also do so for SEMP2 and SCFDP,” said the FDC. With the country’s debt totalling P4.229 trillion as of March this year, and with the deficit soaring 556.2 percent year-on-year from January to May, the economy will be in a more precarious situation should government increase its deficit further, according to the group. The Bureau of Treasury reported that from January to April, the government paid P320.19 billion in debt service—P122.16 billion in interest and P198.03 billion for the principal. The group pointed out that interest payments alone already ate up 26.3 percent of government disbursements over the same period.