IN a rare assertion of its power of the purse not seen in quite a long time, the House of Representatives approved on second reading last week the proposed P1.23-trillion national budget with sizeable cuts in the country’s debt service obligations.

Slashed from the budget to augment the allocations for health, education, agriculture and other much needed basic services were more than P30 billion in projected appropriations which include interest payments for foreign loans totaling P17.8 billion. This amount corresponds to the P6.8-billion savings in debt payments due to the continuing appreciation of the peso, and another P11 billion from interest payments to “illegitimate debts” that the House appropriations committee headed by Albay Rep. Edcel Lagman wants suspended.

Such a move sends no less a strong political message to the Executive, and is actually a conscious attempt at reclaiming the legislature’s constitutional ascendancy in the allocation of the people’s money. Though the Constitution is very clear about Congress’s power over the purse, in reality, an executive budget system has only served to undermine that congressional power, especially given Gloria Macapagal-Arroyo’s control of the legislature, particularly the Lower House.

Lagman proposed the suspension of interest payments for loans “initially identified and challenged to be tainted or wasteful pending their renegotiation and/or condonation” upon the recommendation of civil-society organizations, which had a similarly rare and historic opportunity to present their proposed alternative budget for 2008 before committee members two weeks ago.

Led by Social Watch Philippines and Freedom from Debt Coalition, the NGOs had urged Congress to strike out some P1.3 billion earmarked for anomalous projects from the proposed 2008 budget, including the P503.65-million Austrian Medical Waste Project which involved the purchase of substandard medical waste incinerators for use of 26 government hospitals.

For 2008, the government will pay P17.7 million for interest payment and P79.33 million for principal amortization of the Austrian incinerators, which were found to be emitting toxic pollutants and subsequently banned from operating under the Clean Air Act of 1999.

“Yet the government continues to pay for this useless and toxic loan through automatic appropriation,” lamented Lagman in his sponsorship speech, drawing parallelisms with the mothballed Bataan Nuclear Power Plant that has cost the country a total of P64.79 billion — P43.56 billion as principal amortization and P21.23 billion in interest payments — from 1986 up to this year.

Read Lagman’s sponsorship speech on the national budget bill.

The full payment for the BNPP loan, Lagman pointed out, is more than the combined appropriations for the health (P16.26 billion), agriculture (P23.75 billion), and transportation and communication (P23.34 billion) departments for next year.

“We must never allow our country to again suffer the inordinately expensive folly of the useless and fraudulently procured loan for the construction of the (BNPP)…All for absolutely nothing beneficial to the Filipino people, ” he said.

No thanks to a Marcosian decree, Presidential Decree 1177, and which was affirmed verbatim in the 1987 Revised Administrative Code by the revolutionary government of Corazon Aquino, the country’s debt payments are automatically appropriated in the national budget. For 2008, automatic appropriations for the debt service total P624.09 billion, of which P295.75 billion will go to interest payments and P328.34 billion to principal amortization — an amount that is a little more than half of the proposed budget.

With other automatic appropriations as the internal revenue allotment (IRA) of local government units (P555.55 billion), mandatory allocation for personal services (P384.83 billion), and other allocations (P49.01 billion), what is actually left of the P1.23-trillion budget to the discretion of Congress is a mere 23.4 percent, or P286.62 billion.

But since debt-service payments cannot be stopped without first repealing PD 1177, Lagman said appropriate special provisions in the proposed General Appropriations Act would suffice in expressing the “strong sense of Congress against the payment of tainted and worthless loans.”

Lagman also called on his fellow legislators to “revisit and revise our inept and injurious policies on debt service” and “rekindle the crusade dating back to the 8th Congress to repeal the law on automatic appropriation for debt service.”

Understandably, anti-debt advocates are cheering Lagman’s efforts. Professor Leonor Briones, co-convenor of Social Watch, said this is not the first time that Lagman has done this. Twenty years ago, she recalled in her online column today, the Albay congressman, then a member of the House conscience bloc of independent legislators, teamed up with FDC in a massive campaign to repeal automatic appropriation of the debt service, and cancel payments of illegitimate debt. Briones, at the time, was FDC president.

Though Lagman was successful in leading Congress in reducing the debt service several times and allocating the reduced amount to social development during the Aquino administration, such congressional initiatives were thwarted every time by the president who kept exercising her veto powers. The Constitution grants the President line-item veto powers over a proposed bill, although such a veto can be overridden by a two-thirds vote of both Houses of Congress.

During Fidel Ramos’s time, Briones says Lagman was also instrumental in convincing his colleagues in Congress to convene a Committee of the Whole just to discuss the matter of debt. It served as a venue for Briones and economics professor Solita Monsod to address the entire Congress and explain to legislators the need to repeal PD 1177, the subject of Lagman’s bill. However, the proposed measure was defeated after a caucus of administration congressmen called by House Speaker Jose de Venecia the day before the voting.

Milo Tanchuling, FDC president, says the debt-service cuts are a “wake-up call for Malacañang to decisively address the debt issue. The ball is in Arroyo’s hands now,” adding that a presidential veto would only highlight the need to repeal PD 1177.

Briones, however, expects Arroyo to veto the effort but for which she should be held responsible. “(Lagman) knows it is an exercise in futility as far as the debt. Still, it’s a powerful political gesture. What is interesting is whether she will also veto the expenses to be financed by the cuts. If she doesn’t veto the additional expenses, the budget will be bigger.”

1 Response to Debt-service cuts: Congress finally reclaiming power of the purse?



October 23rd, 2007 at 7:15 pm

Rep. Edcel Lagman is an exemplary official who consistently advocate the national interest such as diverting more budget to social development as against some foreign loans that are anomalously used. We certaily need more officials like Rep. Lagman.

Comment Form