Purisima’s flawed logic

By Rod Kapunan
Backbencher
Manila Standard Today

That unabashedly pro-big business Finance Secretary, Cesar V. Purisima, announced that the Aquino government intends to borrow another $1 billion to fulfill our debt service requirement.  The so-called “whiz kid” of foreign interest who appears to play the proxy role of a hatchet man thinks most Filipinos are stupid not to notice his flawed logic.

This we say because nobody in his right mind would come up with a silly idea of borrowing money with interest just to pay an existing debt.  It is downright insane because he is not recommending a formula on how to improve our economy, but on how to bury the Filipinos deeper in debt.   He is engaged in that harebrain practice known as “lapping” or the habit of borrowing to pay a previous debt.

Yes, it may delay the ticking time bomb, but nonetheless that bomb is bound to explode.  When it does, its devastation would be far greater one could anticipate.  Least,
“Amboy”Purisima forget his economic history, the same debt ruined the economies of Argentina, Iceland, the US, and now Greece and Spain.

Debt service should come from our surplus savings they claim we have, and only to borrow to fill the difference caused by the usurious interest imposed by our creditors, or if necessary to seek a moratorium and restructuring of our debt.

It must be recalled, in the first year of the Aquino government, it floated $1 billion worth of government bonds called “Global Piso Bond.”  Since it was presented in the form of bonds, many could not understand that those bonds were debt papers issued by the government to foreign private banks.  Instead of those foreign economic vultures tagged as creditors, they were tagged as buyers, while the borrowing government tagged as seller, although the bonds were redeemable after a certain period with interest, of course.

The Global Piso Bond was easily scooped because the government offered to the predatory foreign banks a five percent assured interest and an exemption of the 20 percent withholding tax, an exemption not given to depositors patronizing our peso.

Maybe the 7.1 percent increase in our gross domestic product (GDP) spurred him to give it another try.  The misplaced optimism came from an increased revenue collection of 12 percent equivalent to P1.25 trillion and with expenditures of P1.37 trillion, or 15 percent higher than the comparable disbursements in 2011.  That, according to him, “greatly reduced the risk of fiscal slippage, as it is well within the full year deficit program of P279.11 billion.”

That praise was seconded by another “Amboy,” Budget Secretary Florencio Abad, who said, “the administration would likely incur a budget gap “not below 2.3 percent” of the country’s GDP, which is equivalent to about P246 billion by year-end.  The projection is below the official 2.6 percent deficit ratio target or a total of P279.1 billion for 2012. In 2011, the deficit was only P197.8 billion, which was also lower than the P300-billion shortfall expected last year. Purisima attributed the country’s sound macroeconomic fundamentals as the fruits of the reforms of President Aquino he termed as “Aquinomics.”

Of course, as operators of foreign interest, they could claim to be much smarter than most of our legislators whose mental sharpness has been dulled by their huge pork barrel allocation.   They need not even violate Section 24, Article VI of the Constitution that was reduced to a doormat by its framers which requires a bill authorizing the increase of the public debt.  They can even demand that they be applauded for instead of borrowing, they opted to sell bonds and use the proceeds to “lower” our debt service.

The yellow hooters maintain their arrogance knowing that there has yet to be a law prohibiting the President from incurring foreign loans.  In fact, many politicians have used the decrees guaranteeing automatic appropriations to grandstand, although nothing happened to their shrill for fear of being singled out by their imperialist brokers in the routine but rigged election.

For instance, they have yet to abrogate PD 81 granting authority to the President to contract foreign loans, amending RA  4860 Re: Foreign Borrowing Act; PD  150 amending further RA  4860; PD 550 creating the Philippine Foreign Loan Guarantee Corporation; PD 621-A limiting the total amount of loans, credits or indebtedness incurred, and the proceeds of bonds, 
securities and other evidences of indebtedness; PD 1177 providing in Section 31 for the automatic appropriations for the payment of the  principal and interest on public debt;  PD 1807 prescribing the procedure for the waiver of sovereign immunity from suit in connection with foreign obligations;  PD  1939 further amending RA 4860; PD 1961  authorizing the President to enter into foreign currency loan, deposit and guarantee in support of the national economic recovery;  PD 1962 increasing the authorized capital stock of the Philippine export and foreign loan guarantee corporation; and PD 1967  strengthening the guarantee and payment of the Philippines arising out of relent and guaranteed loans.

What made this country most ridiculous is while Congress annually approves a budget allocating for our debt service, Purisima  persists in floating government bonds, thus exposing that he is not out to reduce our debt, but in attracting portfolio investors to completely reduce our economy to one big gambling casino.

Moreover, the hypocrites forgot that our foreign debt was only $28 billion when Marcos was ousted in 1986.  That amount more than doubled to $62.5 billion.  Even if we take it that a sizeable potion  were stashed by his so-called “cronies,” still people kept on longing for his administration because many of his achievements stand today as monuments.  That now spells out the difference between the hocus pocus economics of Purisima from real economics our people could feel has improved their lives.

Finally, Purisima was appointed to that most sensitive position not as a reward for his betrayal of the notoriously corrupt and power-grabbing Arroyo government, but for the fact that he stand as the man whom big business could trust. His being a conspirator in that so-called “Hyatt 10” has nothing to do with what he is now.

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