Loan as ‘investment’
In the ongoing debate over the $1-billion loan pledged by the Bangko Sentral ng Pilipinas to the International Monetary Fund, the Aquino administration has taken the view that the Philippines is part of the global community where the more stable economies are bound to help those in need. But critics point out that millions of Filipinos are mired in poverty and that $1 billion can do wonders to ease their plight. Many say that the country would be better off using the money to build roads and classrooms, or pay its debts.
The controversy is not simply a matter of perspective. Some views deserve more weight than others.
Bayan Muna Rep. Teddy Casiño is among those who oppose the BSP move. “Why on earth would we commit to lend money, tons of it, when we ourselves badly need it?” he asks. He has a point when he says that more than 700,000 micro, small and medium enterprises and millions in the informal sector are so desperate for credit that they have to borrow from usurious lenders.
Militant groups Pamalakaya and Anakpawis likewise have a point in saying that the Aquino administration should instead look into the condition and needs of 72 public hospitals under the health department and 595 government hospitals devolved to local government units. Money is also needed by the government to hire 3,000 new doctors and 8,000 nurses to cover 81 provinces, 118 cities, 1,510 municipalities and 42,000 barangays nationwide. On the education front, the government has to fill the gaps in the public school system, which needs an additional 132,483 new teachers and 97,685 new classrooms to accommodate millions of Filipino youth.
Anakpawis Rep. Rafael Mariano describes the loan pledge as “the height of hypocrisy and insensitivity.” He demands to know how the Aquino administration can lend to the IMF when many Filipinos so badly need basic social services like health, housing and education.
From the other side of the fence, BSP Governor Amando Tetangco Jr. explains the loan to the IMF as the Philippines’ contribution to global efforts to stabilize the world economy. He says the loan is a way of giving back to the world’s “lender of last resort,” which helped the country address its financial difficulties in the past. The Philippines had been a net borrower from the IMF for almost 40 years, until it finally settled its loans in 2006. Through the years, the Philippines managed to build up its international reserves to about $76 billion and is now capable of extending loans to other countries, Tetangco said.
The unfortunate thing is that the Aquino administration bragged about the $1-billion loan at a time when economic growth has yet to become inclusive to the point of lifting millions of impoverished Filipinos out of dire straits.
But buried in the debate is the fact that this lending is actually nothing new. And it’s not a little ironic that it was the Ibon Foundation, a development institution that provides research work and advocacy support on socioeconomic issues, and not the BSP, that pointed out that the Philippines had actually been lending to the IMF for decades now. As proof, Ibon Foundation cited the country’s interest-earning reserve position with the IMF amounting to $517 million as of last May, up from $113.4 million in 2000. (The IMF uses these funds for lending to member-countries needing assistance.) The BSP also has long kept interest-earning deposits in foreign banks and held interest-earning foreign securities, including those issued by the US Treasury. This type of “lending” (the BSP would rather refer to it as “investments”) rose to $64.1 billion in May 2012 from $12.4 billion in 2000. Ibon Foundation surmised that these were not played up in the past because such “lending” of foreign exchange was a normal occurrence in the management of any country’s international reserves.
At the end of the day, the Aquino administration has to make the people understand why the government is lending $1 billion to the IMF even as it continues to borrow money for essential projects like roads, school buildings and hospitals. The administration has to convince the people that it will be able to strike a good balance between meeting the country’s international obligations and uplifting their welfare. For while it may take pride in the fact that the Philippines can now lend money to other nations in need, it must double its efforts to better the conditions of not only the poorest of the poor but the struggling middle class as well.
