Comments on the UN Financing for Development Paper vis-à-vis Debt Issues by Maria Teresa D. Pascual, Freedom from Debt Coalition
Clearly absent in this UN discussion paper is a section that deals with how to get developing countries out of the debt trap that many already find themselves in, and how to avoid it for those developing countries not yet caught in the trap. Any serious discussion on financing for development must take this into consideration. As evidenced in the Philippines, the struggle to develop is inextricably tied to the struggle to get out of indebtedness. Yet the experts hired by the UN to draft this paper fail to recognize this. Worse, in identifying new financing for development for middle-income countries like the Philippines, the paper implicitly recommends that we simply borrow more, or enter into contracts with the private sector that have tended to be extremely disadvantageous to the government, and thereby the people. It is almost as if the UN were delivering a subliminal but cynical message to countries like ours: that there is no way out of the debt trap. But such a premise would logically lead to the conclusion that there is no way for countries like ours to develop. This would go against the UN’s own vision and mission. It is highly unusual and unfortunate that the UN paper on financing for development does not deal with the debt problem as a distinct concern. It merely incorporates this in the section on official development assistance. No mention is made of the debt crisis of the 1980s, known to many as the lost decade, and of which the Philippines was a part. Yet the repercussions of this debt crisis continue to be deeply felt especially in those countries that were hit by the crisis, including ours. The paper in fact takes up only the proposal of the World Bank and the International Monetary Fund for debt reduction of highly indebted poor countries. Known as the HIPC initiative, later renamed the ‘enhanced’ HIPC initiative, this proposal is noteworthy because of the large number of countries that it disqualifies rather than covers as potential beneficiaries. And even among the few that could qualify for debt reduction under this initiative, the amount of debt reduction is small, the benefits questionable, but the costs in terms of adjustment policies and IMF-WB conditionalities that hurt the people more than harm them, are certainly high. Much less is said about the need to reform the international financial institutions—the IMF, the World Bank and regional banks such as the Asian Development Bank—that continue to wield tremendous influence over economic decision-making in developing countries. Getting out of indebtedness also means changing global structures, including these institutions. Our country’s experience with the debt crisis and liquidity crunch of the 1980s, that led to a serious economic debacle, saw per capita real GDP fall to below the 1982 level, historically the highest per capita figure ever recorded in our postwar economic history. Since then ours has been a tumultuous climb to recover what the Marcos dictatorship wasted and the debt debacle destroyed. In the last two decades of the 20th century we have gone through a power crisis, two economic recessions and more recently under the Estrada administration, a financial crisis. We are still a long way from recovering from the fall in per capita real GDP. Breaking the chains of debt Will the Philippines ever free itself of the chains of indebtedness? This will take hard work, serious change of deeply embedded structures, relationships and ways of thinking and doing, and a completely different program for development. The Freedom from Debt Coalition (FDC) believes that the first step necessary to weaken the bonds of debt enslavement is the repeal of the provision (Section 26, Book 6) in the Revised Administrative Code of 1987 regarding automatic appropriations for debt service. Without the repeal of automatic appropriations the country will continue to stay trapped in debt. Pascual /
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