Hell awaits Gloria successor

EDITORIAL

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12/07/2009

The most enduring legacy that Gloria Arroyo will definitely leave the administrations to succeed her is the huge level of debts, primarily incurred in the last two years of her administration when record-setting fiscal blowouts, more than P300 billion this year and around P250 billion next year, are set.

The historical budget deficits would necessarily require also record-level borrowings to plug it since the deficit-problem solving ways of Gloria and her economic team, was to sell up most of the prime government assets, which she had already subjected to fire sales in prior years to make it appear that Gloria has been expertly managing the budget.

UP School of Economics professor Benjamin Diokno said with the excessive deficits during the term of Gloria, the country’s debt more than doubled from the time she started in 2001, after snatching the presidency from popularly elected President Joseph Estrada.

The consequence of this is that subsequent administrations will be saddled with an increasing debt servicing requirement in the budget, which is already 33 percent of the yearly allocations under Gloria.

Diokno said the government now has to borrow money just to pay for interests on the debts, a situation that last occurred during the economic turbulence in the mid-80s.

With the massive spending and eroded tax collections, the government will lose its fiscal flexibility next year and will just have enough in the budget to pay for salaries and employee benefits, interest payments, Internal Revenue Allotment to local governments, and to pay for debts of state firms.

Diokno said the government would have to borrow to pay for utilities, supplies and materials, equipment and public infrastructure.

In a nutshell, the whole government will be near bankruptcy by the time a new president steps into Malacañang next year, thanks to Gloria.

Debts will reach a staggering $3 billion next year that is both domestic and foreign, which are necessary to pay off the ever-increasing debts under Gloria.

Finance Secretary Margarito Teves, despite the fact that the Gloria regime has been in power for close to a decade, still blames borrowings from past administrations for the huge debt pile, obviously to deflect some of the blame to Gloria’s predecessors and to provide cover on her humongous debt appetite.

Yet it would be hard to imagine that the current predicament of the government in spending a fourth of the yearly budget in payments of interests alone, P272.2 billion last year, can be blamed on administrations previous to Gloria.

Diokno had warned that the next president will inherit from the Arroyo administration a fiscal house on the brink of collapse.

He said that under the current fiscal situation, the government has to borrow just to pay for interest payments of its existing debt, while the tax-to-gross domestic product (GDP) ratio continues to fall.

Even as the present government faces many measures that would further erode the narrow tax base, at the same time, with rising population, the pressure for higher social spending continues to increase, he said.

As a result of the massive damage to property and public infrastructure brought about by “Ondoy” and “Pepeng,” the costs of relief, and reconstruction continue to soar.

Data from the Bureau of Treasury showed that the country’s total debt doubled from the time that Gloria grabbed power in 2001 from President Estrada. In 2000, total debts amounted to P2.16 trillion, comprising of P1.068 trillion in domestic debts and P1.098 trillion of foreign debts.

This progressively grew during Gloria’s eight year scourge to P4.2 trillion recently, made up of P2.4 trillion in domestic loans and P1.8 trillion in foreign borrowings.

What bothers the most is that most of the foreign debts under Gloria are now made up of sovereign bonds that carry commercial rates as against direct government borrowings that are usually obtained through concessional rates.

The only problem with government to government borrowings, as in the experience of Gloria, is that most of the kickbacks are extracted from these type of loans such as what was exposed in the ZTE-National Broadband Network and the Northrail scandals.

The piling up of debts under Gloria is the result of the inability of revenue agencies to hit targets, which are progressively raised as the budget is increased each year.

Just this year, the collections of both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) have lagged behind their takes from last year. In all, revenue collections were lower by P24.2 billion in the first half compared with the same period last year. BIR collections were down by P14 billion and Customs collections have a P12 billion difference from last year.

Expenses during the period, however, were P111 billion more compared with last year.

The fiscal situation under Gloria, thus, is a continuous cycle of ever-dwindling tax collections and a yearly growth in expenditures that had proved to be mostly the result of unrestrained spendings by those in Malacañang.

One thing definite for the presidents coming after Gloria, staying in Malacañang won’t be a bed of roses.

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