Overview of the Philippine Debt Situation

Freedom from Debt Coalitiom April 29, 2008

Outline (1)
Philippine Debt Profile 2007 Snapshot of Total Philippine Debt Public Debt - Focus on National Government External Debt
NG Debt External

(to be added later: Closer look at Domestic Debt; Breakdown of GOCC Debts and GFI Debts)

Philippine Debt Through the Years Consolidated Public Sector Debt National Government Debt
NG Debt External

Fiscal Situation and Fiscal Impact of the Debt Arroyo, Debt and the Fiscal Crisis National Government Contingent Liabilities

Outline (2)
Brief History of Debt Restructuring and Debt Relief Schemes Relevant Laws on the Debt and Borrowings
Relevant Policies Relevant Laws

Philippine Debt Profile as of 2007

Philippine Debt

PUBLIC

PRIVATE

EXTERNAL

DOMESTIC

Philippine Debt (end-Q3, 2007)

in trillion pesos, billion dollars

TOTAL
Php 5.144 T US$ 111.51 B

Domestic Debt Foreign Debt

Php 3.335 T US$ 72.30 B PhP 2.540 T US$ 55.07 B PhP 0.795 T US$ 17.23 B Php 1.809 T US$ 39.21 B PhP 1.679 T US$ 36.40 B PhP 0.13 T

Public Debt
Php 4.219 T US$ 91.47 B

Private Debt
Php 0.925 T US$ 20.04 B

US$ 2.81 B

Public Debt taken from DoFs Consolidated Public Sector Debt Private Foreign Debt was taken from BSPs Private External Debt Private Domestic Debt was taken from BSPs FCDU loans of private residents Foreign Exchange Rate was pegged at BSPs end-September 2007 rate: US$1=PhP46.1315

Public Debt

Public Debt
PUBLIC
External

Domestic

NATIONAL GOVERNMENT (NG) GOCCs GFIs

Government Owned and Controlled Corps

Government Financial Institutions

National Government Debt (NG)

(in trillion pesos, billion US dollars, using US$1 = PhP41.6)

NG Outstanding
end 2007

Php

3.712 T

US$

89.24 B

Domestic (by instruments)

Treasury Bills Treasury Bonds/Notes Loans Others

Php 2.201 T 0.614 1.565 0.022 0 Php 1.511 T 0.226 0.354 0.033 0.898

US$ 52.91 B 14.76 37.61 0.54 0.00 US$ 36.33 B 5.44 8.51 0.80 21.58
Source: Bureau of Treasury SDAD Note: Breakdown of totals may not add up due to rounding of digits

Foreign (by creditors)

Multilateral Bilateral Commercial Foreign Denominated Securities

NG Contingent Liabilities
Domestic Debt Foreign Debt

0.484
0.065 0.419

11.64
1.56 10.08

National Government Debt (NG) - External

NG External Debt (per lender type)

in billion US$, as of end 2007

20.00 18.00 16.00 14.00 12.00 10.00

19.35

6.29

4.74

8.00 6.00 4.00 2.00 -

0.50 0.19

Ot h

er s

Bo nd

Co mm erc

Bi lat e ial

ral

Mu ltil ate ra

NG External Lenders - Multilateral

Asian Development Bank (ADB)
European Union (EU) European Investment Bank (EIB)

OPEC - Organization of
Petroleum Exporting Countries

OPEC Fund for International Development (OFID) International Fund for Agricultural Development (IFAD) International Bank for Reconstruction and Development (IBRD) International Development Association (IDA)

United Nations (UN)

World Bank (WB)

NG Multilateral Debt by Lenders

in million US dollars, as of end 2007

3,043.43
3500.0 3000.0 2500.0

1,474.30
2000.0 1500.0 1000.0

15.95
500.0 0.0

7.25

28.62

172.35

ADB

EIB

OFID

IFAD

IBRD

IDA

Debts claimed by ADB in percentage

2% 4% 1% 2% 2%

Finance 40% Infrastructure 17%

5%

Multiple Agency 7% Energy 6%

40%

8%

Transportation 6% Agriculture 8%

6%

Environment 5% Education 4% Micro-credit 2%

6%

Agrarian Reform 2%
7% 17%

Health 2% Others 1%

NG Debt External Lenders - Bilateral

Australia Austria Belgium Belgium
(via Paris Club)

Export Finance and Insurance Corporation (EFIC) Bank Austria AG Government of Belgium Paris Club Account without Peso Blocked Deposit w/ BSP Brunei Investment Agency Canadian Agency for International Development (CIDA) Export Development Corporation (EDC)

Brunei Canada China

China Export Import (EXIM) Bank China National Constructional & Agricultural Machinery import & Export Corporation (CAMC)

Denmark France Germany

Danish International Development Agency (DANIDA) French Protocol Loans Kreditanstalt fuer Wiederaufbau (KfW)

NG Debt External Lenders Bilateral p2 Italy Japan Kuwait Paris Club Saudi Arabia South Korea Sweden United States (US)
Italian Protocol Loans Mediocredito Centrale (MCC) Japan Bank for International Cooperation (Japan EXIMBANK and OECF, and via Paris Club) Kuwait Fund for Arab and Economic Development (KFAED) Paris Club Account without Peso Blocked Deposit w/ BSP Saudi Fund for Development (SFD) Korean Export-Import (KEXIM) Bank Swedish International Development Cooperation Agency (SIDA) Public Law 480 United States Agency for International Development (USAID)

NG Bilateral Debt, By Country Top 8

6,000.00
5,302.40

(in million dollars, as of end 2007)

5,000.00

4,000.00

3,000.00

2,000.00

1,000.00

354.75

190.99

115.06

87.81

60.12

54.58

61.66

Japan

United States (US)

Austria

France

China

Canada

Australia

South Korea

Debts Claimed by Japan in %,

4% 4% 1% 2%1%

end year 2007

Infrastructure 46% National Govt 26%

5%

Transportation & Communication 11% Agriculture 5%

11% 46%

Education 4% Agrarian Reform 4% Science & Technology 2% Environment 1%

26%

Others 1%

NG External Lenders - Commercial

Australia New Zealand
ANZ/Export Finance and Insurance Corporation

Austria France Germany Netherlands Spain

Raiffeisen Zentralbank (RZB) sterreich AG Credit Commerciale de France Deutsche Bank AG ABN-AMRO Bank Banco Bilbao Vizcaya Banco Santander

United States (US)

Bank of America Corporation (BAC)

NG External Debt Commercial Banks, Top 6

in million US dollars, as of end 2007 350.00 300.00 250.00 200.00 150.00 100.00 50.00 Credit Raiffeisen ANZ/Export Finance and Zentralbank Commerciale de France (RZB) Insurance Corporation sterreich Australia-NZ AG Austria Deutsche Bank AG Germany ABN-AMRO Banco Bilbao Vizcaya Bank Spain Netherlands 58.22 49.76 24.69 6.69 18.33 347.25

Debt Claimed by Deutsche Bank, in %

9% Salam Bridge 9%

12% 38%

Tulay Pangulo Magsasaka Project 12% Tulay Pangulo para sa Magsasaka 8% 8% Tulay ni Erap sa Barangay 24% Tulay ng Pangulo sa Kaunlaran 9% Tulay sa Szopad 38%

9%

24%

NG External Debt by Agencies,Top 6

in million US$ as of end 2007

22,735.80

25,000.00

20,000.00

15,000.00

10,000.00
3,379.89 1,036.76 1,185.62 527.75 486.07 456.79

5,000.00

2007

DA

DECS

DENR

DOF

DOTC

DPWH

RP (NG)

Philippine Debt Through the Years

Consolidated Public Sector Debt through the years

Public Sector Debt

(in billion pesos, nominal)
6,000
5,074 5,289 5,034 4,944

5,000
4,369

4,000 3,000 2,000 1,000 1993 1994 1995 1996 1997 1998
1,913 1,949 2,167 2,237 2,952 2,669

3,666 3,624

3,850

1999

2000

2001

2002

2003

2004

2005

Ramos

Estrada

Arroyo

2006

Public Sector Debt

(in billion pesos, nominal)

6,000 5,000 4,000 3,000 2,000 1,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 External Domestic

Ramos

Estrada

Arroyo

Public Sector and National Government Debt

(in trillion pesos)

6
Total Public Sector Debt

5 4 3 2 1 0 1993

Total National Government Debt

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Ramos

Estrada

Arroyo

2006

30%

Total Public Sector Debt and NG Debt Growth Rate, in %

25%

Public Sector Debt Growth Rate National Government Debt Growth Rate

20%

15%

10%

5%

0%

1994
-5%

1995

1996 Ramos

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Estrada

Arroyo

-10%

Growth rate of CPS steep rise in recent years under GMA Decrease from 2004 to present factors:
Forex Rate Pre-payment Less Borrowings

Relevant Developments:
NPC Borrowings (account for big part of GOCC debt) impact on ratio of NG and Non NG debt; Assumption of NPC liabilities after privatization must take a look at impact From 1999 to 2000: Huge drop in domestic debt and increase in external conflict with data released earlier changes in recording system?

NG Debt through the years

Outstanding Debt of the National Government

(in billion pesos, nominal) 4,500.0 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ForeignDebt DomesticDebt

Aquino

Ramos

Estrada

Arroyo

Outstanding Debt of the National Government

(in percentages)
Aquino 1990 1991 1992 1993 1994 Ramos 1995 1996 1997 1998 Estrada 1999 2000 2001 2002 2003 Arroyo 2004 2005 2006 2007

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ForeignDebt DomesticDebt

After 1986 (post Marcos period) increase in domestic debt vs external Factors: During Aquino period, more difficult to borrow from external sources than borrowing domestically; Eventually, restoration of credit rating, hence heavy external borrowing; but also heavy domestic borrowing capital available ?? Buyers of domestic bonds may also be subsidiaries of foreign banks

NG Outstanding Debt
1,000 900 800 700 600 500 400 300 200 100 -

(in billion pesos, 1985 prices)

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Ramos

Estrada

Arroyo

2007

Sharp increase in first 3 years under GMA Decrease from 2004:

Foreign Exchange rate peso value of US Dollar denominated debts are lower

Lets look at trend if denominated in US Dollars ..

NG Outstanding Debt
25

(in billion dollars, 1985 prices)

20

15

10

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Aquino

Ramos

Estrada

Arroyo

2007

Outstanding NG Debt as % of GDP

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

using nominal values

Aquino

Ramos

Estrada

Arroyo

Outstanding Public Sector Debt as % of GDP

using nominal values
140% 120% 100% 80% 60% 40% 20% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Ramos Estrada Arroyo

NG Debt to GDP from 2004 seem to indicate improvement as GDP has been increasing. NG debt per capita very steep rise, and only small decrease since 2004

50 45 40 35 30 25 20 15 10 5 -

Outstanding NG Debt per Capita

in thousand peso, nominal

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Aquino

Ramos

Estrada

Arroyo

2007

70

Public Sector Debt per Capita

(in thousand pesos, nominal)

60

50

40

30

20

10

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Ramos Estrada Arroyo

18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -

Real Per Capita Income and Real NG Debt per Capita

in thousands of pesos

GDP Real (1985 prices) per capita NG Debt (1985, prices) per capita

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Aquino

Ramos

Estrada

Arroyo

2007

0.60

Real Per Capita Income and Real NG Debt per Capita

in thousands of dollars

0.50 GDP Real (1985 prices) per capita NG Debt (1985, prices) per capita 0.40

0.30

0.20

0.10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Aquino

Ramos

Estrada

Arroyo

Changes in the structure of NG External Debt ...

Short term debt vs medium and long term debt; Rise of bonds and financial instruments The government is on a drive to restructure old debts, and improve debt manageability. Continuing the post-Marcos policy and IMF-WB prescription of
preferring medium-to-long term debts over short-term debts, preferring financial market instruments such as bonds over other forms of loans.

Short, Medium and Long Term Debt as % of External Debt

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Medium and Long-Term Short-Term

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

2007

NG External - Short, Medium and Long Term Debt, in billion dollars

60.00

50.00

40.00

30.00

Medium and Long-Term Short-Term

20.00

10.00

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

Changes in Creditor Profile

Types of Debt as % of Total External Debt
100% 80%

Multilateral

Bilateral

60%

Bondholders /Noteholders Banks and Other FIs

40%

20%

Suppliers
0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Others

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

National Government External Debt: NG Direct

Foreign Denominated Securities

NG Assumed Liabilities

NG EXTERNAL DEBT OUTSTANDING,

4,500

in billion pesos, nominal values

4,000

Assumed
3,500

3,000

Foreign Denominated Securities NG Direct

2,500

2,000

1,500

1,000

500

1990 1991 Aquino 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Arroyo 2005 2006 2007 Ramos Estrada

Assumed Liabilities of the NG

Significant portion immediately after the Marcos years (large part of it is assumed liabilities of private sector, based on sovereign guarantees of private debts) Have been reduced over the years Public guarantees of private risks, liabilities and profits are taken on different forms

NG EXTERNAL DEBT OUTSTANDING,

90

in billion US$, nominal values

80

Assumed Foreign Denominated Securities NGDirect

70

60

50

40

30

20

10

1990 1991 Aquino 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Arroyo 2005 2006 2007 Ramos Estrada

Fiscal Situation and Fiscal Impact of Debt

Inexhaustible Debt
6.00 5.00 4.00 3.00 2.00 1.00 5.35

NG External & Domestic, in billion pesos

5.29

3.71

1990 NG Outstanding Debt 1991 to 2007 NG + Borrowings from Debt Service 1991-2007

S1

NG 2007 Outstanding Debt

National Government Borrowings, Debt Service (principal and interest) in billion pesos, nominal
900 800 700 600 500 400 300 200 100 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Borrowings Debt Service

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

NG Borrowings and Interest Payments

700

in billion pesos, nominal

600

500

Interest Payments Borrowings

400

300

200

100

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Marcos

Aquino

Ramos

Estrada

Arroyo

2007

Our gross borrowings and our total debt servicing (interest plus principal) are almost at par with each other. The government is borrowing more than its deficit because it has to cover for the principal amortization of debts which is an off-budget expenditure.

National Government Borrowings & the Budget Deficit, in billion pesos, nominal
700

600

Borrowings Deficit

500

400

300

200

100

0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

-100

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

National Government Borrowings

NG Borrowings (in billion pesos, nominal)
450 400

Gross Domestic Borrowings

350

Gross External Borrowings

300 250 200 150 100 50 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -50 2007

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

National Government Borrowings, Debt Service, Budget Deficit, in billion pesos, nominal
900 800

Borrowings
700 600 500 400 300 200 100 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -100 2007

Debt Service - Interest and Principal Deficit

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

Debt Service and Borrowings Drop

The debt to tax ratio became almost 1:1 in 2006. But there was a drop of debt payments and borrowings from 2006 to 2007 due to the ff:
1. Less Debts to Pay:
Pre-payment of Debts: Last 2006, our Government prepaid $220 million worth of obligations to the IMF - Note spike in debt service in 2006

2. The further weakening of the US Dollar. 3. More Revenues to Burn

Implementation of the 2% increase in RVAT Privatization of Assets GDP increase leading to increase in taxes

NG Expenditures vs Revenues vs Borrowings

in billion pesos, nominal
1,400

Tax and Non-tax Revenues

1,200

Total Expenditures
1,000

Borrowings
800

600

400

200

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Marcos

Aquino

Ramos

Estrada

Arroyo

2007

NG Tax & Non Tax Revenues vs Tax Revenues

in billion pesos, nominal
1,200

1,000

Tax and Non-tax Revenues Tax Revenues

800

600

400

200

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Marcos

Aquino

Ramos

Estrada

Arroyo

2007

The Tax Crunch

1,200

NG Revenues vs. NG Debt Servicing (Principal &

Interest), in billion pesos, nominal

1,000

Non-tax Revenues
800

Tax Revenues
600

Debt Servicing

400

200

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: Bangko Sentral ng Pilipinas

The Tax Crunch

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

NG Debt Payments (Principal & Interest) as % of Revenues

Aquino

Ramos

Estrada

Arroyo

Fiscal Impact of NG Interest Payments

National Government Interest Payments from 1980-2007 in billion pesos, nominal

350 300 250 200 150 100 50 0
Interest Payments

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Marcos Aquino Ramos Estrada Arroyo

10%

15%

20%

25%

30%

35%

0% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Arroyo 2004 2005 2006 2007 Estrada Ramos Aquino Marcos

5%

Interest Payments as % of NG Budget

Interest payments have been increasing in nominal terms Interest payments as percentage of budget improved since 2005 but has not gone below the levels during the 1980s debt crisis. Crisis for the lenders not in terms of the impact on spending but whether you can pay, in full, on time

1,400

NG: Total Expenditures vs Interest Payments vs Total Social Services vs Health vs Education
Total Expenditures Social Services

1,200

1,000

Education
800

Health
600

Interest Payments

400

200

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Marcos

Aquino

Ramos

Estrada

Arroyo

2007

Debt per capita vs. Social Services per Capita

in pesos - nominal terms
12,000

10,000

8,000

Debt payment per capita Social service per capita

6,000

4,000

2,000

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Aquino

Ramos

Estrada

Arroyo

Debt per capita vs. Social Services per Capita

in pesos - real terms (1985 prices)
2,500

2,000

Debt payment per capita

1,500

Social service per capita

1,000

500

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Aquino

Ramos

Estrada

Arroyo

Figures show that the drop in debt payments from 2006 to 2007 did not translate into a proportional increase in social spending.

Neglecting Education
Basic Education Spending per pupil (deflated)
3500 3000 2500 2000 1500 1000 500 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: NSCB Philippine Statistical Yearbook 2005

Neglecting Health
Health per capita (deflated)
100 90 80 70 60 50 40 30 20 10 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Marcos

Aquino

Ramos

Estrada

Arroyo

Source: NSCB Philippine Statistical Yearbook 2005

2,500

Suffer the Future

Debt per capita vs. Health, Education per capita
1985 prices

2,000

Health per capita (deflated) Education per capita (deflated)

1,500

Debt payment per capita (deflated)

1,000

500

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Aquino

Ramos

Estrada

Arroyo

The Burden of Debt

National Government Debt per Filipino (using

2007 NG Debt and NSCB projected 2007 population)

P 42,819.42

Debt Servicing per minute (using data on Interest

and Principal payments on 2007)

P 1,165,898.02

External Debt as % of GDP (using NSCB 2007GDP data

and external debt data as of Sep 2007 from BSP)

34.51%

The Suffering Continues

DBM Proposed Spending for 2008
(in billion pesos)
Debt Service Interest Payments Principal Amortization 624.09 Education 181.86

295.75

Health

22.90

328.34

Agriculture and Agrarian Reform Environment Military

41.18

10.06 61.42

Note: Breakdown of totals may not sum up due to rounding of digits.

Distribution of Total Spending, per Administration

in percentages
100% 90% 80% Net Lending 70% 60% 50% 40% 30% 20% 10% 0% Aquino (86-92) Ramos (93-98) Estrada (99-00) Arroyo (01-07) Economic Services Social Services Interest Payments

Gen Public Services Defense

Arroyo, Debt, and the Fiscal Crisis

The 2004 Fiscal Crisis

In 2004, the Arroyo administration finally admitted and declared a fiscal crisis, after it incurred huge amounts of deficits year after year. It survived the crisis and reduced the deficit mainly through
Further increasing its borrowings up to 2006 Aggressive indirect taxation schemes like E-VAT Spending cuts Increasing non-tax revenues, mainly through privatization Increase in GDP/GNP translating to increase also in other tax revenues have to check figures for direct taxes

Beefing-up Revenues to Survive

Revenues vs. Debt Servicing - Arroyo
1,200

(in billion pesos, nominal)

1,000
Non-tax Revenues

800

Tax Revenues Debt Servicing

600

400

200

2001 2002 2003 2004 Arroyo 2005 2006 2007

Source: Bangko Sentral ng Pilipinas

100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00

Privatization Proceeds
in billion pesos

90.62

5.66
10.00

9.43 1.72 4.18 4.65 1.17 0.59 0.57 0.42 2.43 5.82

0.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Ramos Estrada Arroyo

Arroyo Regime - Still Biggest Borrowings, Largest Debt Payments

Debt Service and Borrowings, in real (1985) prices, Annual Average
140.0 120.0
Debt Service (real) Annual Average

(in billion pesos)

126.9 118.3

100.0 80.0 60.0 40.0

59.6

Borrowings (real) Annual Average

85.4

55.9 52.7

64.7

23.9

20.0 Aquino (86-92) Ramos (93-98) Estrada (99-00) Arroyo (01-07)

Comparing Aquino's, Ramos', Estrada's and Arroyo's Revenues, Expenditures and Borrowings 7,000,000.00 6,000,000.00 Revenues 5,000,000.00 Expenditures Borrowings 4,000,000.00 3,000,000.00 2,000,000.00 1,000,000.00 Aquino Ramos Estrada Arroyo
Administration

Amount in B Php

National Government Contingent Liabilities

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 1990

National Government Oustanding and Contingent Debt

(in billion pesos, nominal)

Contingent Liabilities Outstanding Debt

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Aquino

Ramos

Estrada

Arroyo

2007

National Government Contingent Liabilities

900 800 700 600 500 400 300 200 100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Foreign Domestic (in billion pesos, nominal)

Aquino

Ramos

Estrada

Arroyo

Contingent Liabilities and the Prepayment of NPC Debts

The Philippine Government guaranteed some of NPCs debt to its lenders. Some of its debts thus reflect in the Contingent Liabilities The sharp decrease in contingent liabilities may have been because of the pre-payment of the debts of National Power Corporation (NPC). In December 2004, the Power Sector Assets and Liabilities Management Corporation (PSALM), in accordance with the Electric Power Industry Reform Act of 2001 (EPIRA), pre-paid up to US$1 billion of the National Power Corporation's (NPC) debt or about 14% of total NPC debt.

BRIEF HISTORY OF DEBT RESTRUCTURING / RESCHEDULING / DEBT RELIEF for the PHILIPPINES

1960s 70s - the Philippines was unable to service a significant portion of its private debt. Negotiations for debt service rescheduling with the London Club resulted in new loans for the Philippines as part of the debt rescheduling package. 1983 - The Philippines defaulted on its foreign obligations in 1983 and negotiated for a moratorium on debt service payments in 1984. 1985 - Philippines underwent a debt rescheduling measure thru the Baker Plan which involved increased bank lending for the implementation of the adjustment program under the IMF.
Sources : US Department of State, 1993 Country Reports on Economic Practice and Trade Reports; www.rrojasdtatabank.org; Training Package 9 - Commercial Debt Chapter IX.3.a: The London Club , The London Bank; World Bank Operations Evaluation Department, 2001;

1986 - There was a gradual shift towards longer-term and more concessional sources of financing, away from short-term, commercial debts. 1989 - The Brady Plan initiated for the Philippines, culminating in the signing of the 1992 Securitization Deal. Loans were converted into Brady Bonds. 1990 World Bank financed the Debt Management Program Loan to the Philippines.

March 1993 Paris Club and IMF arrangements ended with the Philippines generally in compliance with the IMF targets. 1994-1997 The Philippines started its IMF Exit Program last 1994 and ended in 1997.

1996 1997 - the Philippines swapped $4.4 billion of Brady bonds for uncollateralized long-term bonds as a form of debt reduction. Because the swap was effected at a discount based on secondary market prices, debt outstanding commensurately reduced. 2000s Pre-payment (2006), Privatization and Regressive Taxation were implemented as policies.

Relevant National Laws and Policies on the Debt & Borrowings

RELEVANT LAWS
FOREIGN BORROWINGS ACT (R.A. 4860) dated September 8, 1966

AMENDMENTS AS AMENDED BY PRESIDENTIAL DECREE NO. 1939

DESCRIPTION
This law authorizes the President to obtain foreign loans for economic development as well as to guarantee foreign loans and/or bonds incurred by government owned and controlled corporations. A Presidential Decree that prioritizes debt servicing which assures creditors of regular and updated debt payments at all times.

P.D. No. 1177, Section 31 Automatic Appropriations (July 30, 1977) Now incorporated in Article VI. Section 24. of the 1987 Administrative Code

Philippine Constitution Section 20, Article VII

This law gives authority to the President to contract or guarantee foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. Aside from ensuring that Foreign loans can only be incurred through monetary authority, this Constitutional provision also gives prime importance on public access to information on these loans.

Philippine Constitution Section 21, Article XII

BSP CIRCULAR NO. 1389 DATED 13 APRIL 1993, AS AMENDED (PART TWO, CHAPTER I)

A Bangko Sentral ng Pilipinas circular which states that Foreign borrowings of the public sector need prior BSP approval except short term Foreign Currency Deposit Unit (FCDU) loans specified under Section 24.4 of Circular No. 1389.

The Philippine BOT AMMENDMENTS: Law (Republic Act No. 7718), July 26, An Act amending certain Sections of 1993

This provision allows private sectors to finance, construct, operate and maintain priority projects Republic Act No. 6957, included in the entitled An Act development programs of Authorizing the all concerned government Financing, agencies including Construction, government-owned and Operation and controlled corporations Maintenance of Infrastructure Projects and local government units.
by the Private Sector, and for other Purposes.

Official Development Assistance (ODA) Act of 1996

AMMENDMENT REPUBLIC ACT 8182 AS AMENDED BY REPUBLIC ACT 8555, OFFICIAL DEVELOPMENT ASSISTANCE ACT OF 1996
AN ACT EXCLUDING OFFICIAL DEVELOPMENT ASSISTANCE FROM THE FOREIGN DEBT LIMIT IN ORDER TO FACILITATE THE ABSORPTION AND OPTIMIZE THE UTILIZATION OF ODA RESOURCES, AMENDING FOR THE PURPOSE PARAGRAPH 1, SECTION 2 OF REPUBLIC ACT NO. 4860, AS AMENDED

The ODA Act of 1996 states that it will finance only projects that promote economic development and welfare of developing countries and that it is concessional in character and which contains a grant element of at least 25 percent (calculated at a rate of discount of 10 per cent).