President Benigno "Noynoy" Aquino III (photo from www.gov.ph)
The Aquino Administration submitted its budget proposal for 2011 to Congress this week. It is through the budget where one can see the priorities of the government, in how much it intends to spend on various programs of government. For 2011, the government under the Aquino administration intends to spend P1.645 trillion.
In his budget message, the President claimed that the spending proposal of the government for next year is anchored on “reform”. The budget claims to have a “bias to the poor and the vulnerable”. However, right at the onset, it is still oriented towards severe austerity, masked with the euphemism “fiscal responsibility,” a government spending orientation that has been the standard policy for decades. It is a policy intended not to simply ensure that the “meager resources” of the government are spent wisely for the people, to ensure that the government is able to pay its foreign and local creditors its monstrous, anomalous and scandalous debt.
Just to show you how scandalous and hypocritical the government’s budget orientation is, the Aquino Administration proposes to pay foreign creditors and financial institutions a whopping P823.27 billion next year (P357.09 billion in interest payments, P466.18 billion in principal amortization not formally included in the P1.645 trillion total budget). According to the initial budget analysis and report of IBON Foundation, the increase in interest payments alone “is the largest absolute increase in interest payments in the country’s history and, at a 29.2% increase from the year before, is the second largest percentage increase after the 32.6% growth in 2000.”
Despite this obedient debt servicing policy of the government, the country’s enormous debt burden will not get any better. The government projects that the outstanding debt of the country will stand at P4.79 trillion by the end of 2010, and despite the P823.27 billion proposed debt service for 2011, the outstanding debt will increase to a monstrous P5.19 trillion by the end of 2011. This is a cycle of self-destruction which the government can actually stop through many options for debt cancellation or even debt moratorium, if it only had the strong political will to serve the people instead of serving its foreign creditors.
If indeed the government is intent to “maximize the efficient use of our scarce resources,” how then can it afford such scandalous debt payments? That’s where the budget cuts on social and economic services spending for the people come in. But isn’t that what the government its for? To serve the people? Apparently not.
The University of the Philippines, the nation’s premiere state university, is bound to get its largest budget cut in its history, with a slash of more than P1.3 billion, a 20% decline from its budget this year, and a 32.6% decline from its budget last 2009. The Philippine Normal University will get a worse 24% budget cut. State universities and colleges on the whole, will get a 1.7% budget cut, despite increasing enrollment in state schools because of the increasing cost of private higher education. Aquino’s budget message affirms the policy of gradual state abandonment of tertiary education which has only resulted in the increasing cost of education in state universities. According to Aquino, his government is “gradually reducing the subsidy to SUCs to push them toward becoming self-sufficient and financially independent, given their ability to raise their income.” Government apologists justify the state abandonment of public universities by saying that resources are better spent at basic and secondary education, but they totally miss the point by failing to identify the logic of the correlation between the increase or decrease of either state function.
Despite the nominal increase in the basic and secondary education budget for 2011, the Aquino government intends to cut the budgets of many other social and economic services. According to an initial study of IBON Foundation, the government intends to cut the budget for the following sectors: agriculture and agrarian reform (falling by P23.1 billion or 26.0%), communication, roads and other transportation (P7.9 billion or 5.2%), water resources development and flood control (P4 billion or 21.4%), and power and energy (P3.4 billion or 65.5%). It also almost completely cuts off government subsidy to government agencies and corporations that are supposed to provide several state functions, like the National Food Authority, and intends to privatize other similar government corporations.
Oddly enough, even as the government scrimps on social and economic services spending, it nevertheless finds a way to fund its war against Filipino rebels in the countryside. It gives the military its largest budget in recent history, with an 81% increase to P104.5 billion. Bullets instead of books? This just goes to show the utter insincerity of the government in forging peace and socio-economic justice by addressing the roots of rebellion.
Is this the “daang matuwid” or the “reform” President Aquino promised? It doesn’t look any different from the policies of any past administration. Granted such, what kind of change are we supposed to expect? Only the naive expect something different to result from something committed over and over again.
law student, national democracy activist, film school graduate, photography hobbyist
Facebook Comments
Pingbacks to “Initial observations of the 2011 Aquino budget”
12 comments to “Initial observations of the 2011 Aquino budget”
A disappointing start to PNoy’s presidency. I think opting for a debt moratorium or debt cancellation would not be an option as long as Aquino is the president.
Hi Victor,
Been a long time. How are you?
Saw your status msg in ym and wandered in. Would just like to put my thoughts on this entry. Guess Im coming from a financial background – what is your idea re the debt servicing? If we decide to renege on our debt, all our lenders will simply not trust us anymore (mind you these people have elephant memories). A lot of people (domestically and internationally) buy our debt / lend us because they trust that we will 1) PAY them back 2) ON TIME. To give our lenders a human face, we dont just borrow from opportunistic foreign gov’ts, evil bankers and satanic funds, a lot of our borrowers are pension funds, simple retirees (from the Philippines to Timbuktu), or quite possibly a high school teacher from somewhere. The reason they trust some pacific island countryto give back their money is because we’ve always had a good track record.
If we decide to renege / cancel, our country will seriously be set back a decade (trust me, this will happen). Yes we save on interest, but we lose a lot on trade, goodwill, and the PHP / US$ will probably fly upwards and make everything more expensive (for an illustration, check out Argentina in Wiki). We may have more funds for education, but this increase in education funding will surely buy less.
Never was a PNoy supporter, but for this particular issue, there really is no other option but to increase payments even if the Pope or the cleanest of our politicians were to be put as president. Our govt just chose the lesser of evils so maybe we can give em some slack.
This is just the way the world works… too bad.
A debt moratorium / cancellation SHOULD never happen under any president’s term.
PS: A possible reason for the increase in payments is because right now borrowing costs are extremely low, so we MIGHT actually be borrowing the same amount at cheaper interest to pay back our more expensive debt.
Hope I put some light on these issues.
Hi Bill,
I do not agree that the Philippine government is not without options. It can assert the cancellation of odious debts incurred by previous administrations, to negotiating particular loans, to delaying payments. It can even default, if it wills it. The only reason the government continues its current debt payment policy is not to finance the needs of the people, but to maintain “goodwill” with creditors so that it can continue borrowing for further repayments. It’s a self-destructive cycle that causes the Filipino masses to suffer from severe and unjust cuts on social services.
Honoring the country’s debt should always be taken in the context of prevailing social and economic conditions of the country. The government is beholden to the sovereign people, not its creditors. When the interests of the two collide, it is utterly preposterous for the government to side with the creditors.
i guess these kinds of talks happen all the time in the august chambers of our congress hahaha
what will happen if this goodwill is smeared? i dont even want to think about what will surely happen if the govt were to merely announce that it’s considering delaying/defaulting on payments. you are correct, we should think of social and economic conditions, but not about what’s prevailing and rather, on what WILL prevail after this proposal occurs. these prevailing social/economic condition won’t exist – it’s gonna get much worse immediately, for the next decade or so after we choose to delay/default.
Think of it this way – how long does it take for a person to trust someone who screwed him(or her)?
to whom should a heavily importing country turn to to get favorable trading terms after we destroy this goodwill? We cannot think that the same budget (and relatedly, GDP) will continue to exist such that we can allocate more for social services. In the long run, we still have to bite the bullet and pay these loans back, but the Philippines cannot do it by simply relying on its internal economy (think China under Mao). Among a myriad of consequences, here a simple one: if we delay/default, the exchange rate will double (at least), and what will happen to our US$ debt? They will double – at least, and this does not include interest yet.
And what about the hapless individuals we borrowed money from abroad and domestically. It’s just not right to say “screw you” to them just because we decide at the present that the mistakes/self-destructive cycle started by our forefathers isnt the concern of our generation anymore.
I think we all know this scenario WILL happen, and you are probably hoping that in the mix of things, we will find a way to fix things internally should we renege. But in the context of surely-would-be failing services in the aftermath of this proposal, do you think the simple layman/masa would understand the ivory tower economics governing his purchase of tinapay and galunggong?
You are correct, the government is beholden to its people – but that budget allocation is its most logical way of aligning itself with the interests of its people.
there is a way, i agree with you, and i continue to hope. but it’s not as simple as not honoring our commitments or doing magic with our debt structure. It will take a combination of fixing all the issues you’ve outlined in your blog and in your fiery rhetorics. It will take time, and thats what makes it interesting to look to our future.
Simply put, you’re saying that the government is effectively held hostage on speculations of economic disaster, whether real or imagined, peddled by financial institutions and their neoliberal followers? When do we propose to end this self-destructive cycle, if creditors, with good faith, intend to end it at all? Despite monstrous annual debt payments, the total debt stock has been increasing and increasing year by year.
I agree that the Philippines has an import-dependent, export-oriented economy with little or no real national industry. And I agree that we will experience immediate economic setbacks in the event of a delay or default. But to say that it would last for decades at such disastrous proportions is a calculated exaggeration to prevent us from doing it. I believe the country, with all its resources, human, natural and otherwise, has the capacity to build a (largely) self-reliant economy that will ensure the prosperity of more Filipinos than the current neoliberal orientation. How and when do you expect government to start a genuine national industrialization program without rejecting the impositions of its creditors, whose interest is in stunting genuine national economic development in the country to keep us forever dependent on their credit?
Ako rin nagulat sa DND budget nung madownload ko yung GAA. Pero nung tiningnan ko ang malaking increase eh DND>AFP>GHQ>Military pensions administration na ~24billion pesos for 2011 from less than ~20 million pesos from 2008-2010. Yun pala eh inilipat mula sa Retirement Benefits Fund ang military pensions. Pero kahit na tanggalin ang military pensions, malaki pa rin ang in-increase eh. Nakaka-disappoint pa rin kahit papaano.
At yung PS+MOOE ng UP naman ay may maliit na increase. Wala lang talagang CO para sa lahat ng SUCs (not entirely sure about this pero dun sa tiningnan ko wala halos lahat eh).
Prioritizing the “bullets” instead of “books”. Then the military will sell out the equipments to the rebels; thus creating an enemy image so that the people will continually support the government in all its “reforms” (whether good or bad).
Agriculture’s; decreases, okay the bullets are edible. The 2011 Budget is major league bullshit!
This is the biggest challenge placed on PNoy’s shoulders — allocating the budget when there is really nothing to allocate. Sadly, the past administration depleted our budget and allocated a lot in her own pockets before stepping down from her post which left PNoy no other choice but to turn to creditors to be able to move on. From a point of view of a simple individual like me who don’t know much about the technicalities of the law and economy, if you want creditors to trust you, all you need to do is to keep your integrity intact by taking care of your obligations and commitments. It’s like what I hear from the “Bumbays” around — “Dapat wala palya ha para ako bigay sa yo mas malaki.”
Off-topic pero you’ve changed your URL na pala hehe
Hmm. Very interesting… I love the discussions. And even though the banter of bill and victor are very stimulating, I think I’ll still side with Bill. Sorry if I’m more of a pragmatist and a cynic but I doubt that the Philippines is ready to be self-sufficient. Sorry, but you are envisioning a turn of events that is still too early. Reforms need time to undo the mistakes of the past. We can bite the hand that helps us in our time that we still need it.Like it or not, the money from those creditors are actually helping our country. And if we need to endure budget cuts for services, why not? When in the long run, it would be beneficial for the next generation. I do not think this will become a destructive cycle. One just needs to lessen the burden by properly allocating the funds, pay the creditors in time and gradually we pay off all of our debts because we still have enough to spare. You cannot blame PNoy because he acquired a debt filled office when he won the presidency. Don’t get me wrong I also don’t like the guy. But he is trying his best…
http://www.dbm.gov.ph/index.php?pid=3&nid=2