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“Moratorium,” according to Merriam-Webster’s Online Dictionary, means “suspension of an activity.” Recently, Youth Against Debt (YAD) called for a debt moratorium and for government to prioritize funding for education. The 1987 Constitution mandates the State to “assign the highest budgetary priority to education,” yet education spending was only 2.26 of the Gross National Product (GNP) in 2007. This falls below the accepted international standard for financing education, called the UNESCO Delors Benchmark, which set the education expenditure of developing countries at six percent of the GNP.
Sadly, the country, already suffering from all sorts of crises, continues to pay for the behest loans, including the one for the Bataan Nuclear Power Plant, incurred during the dark martial law years, in the amount of $1.9 billion. The power plant was built in 1976, despite the fact that it was located on a known earthquake fault. The unpopular project was stopped and never became operational, but the country still pays interest to the tune of $170,000 daily (P9.35 million a day or P3.4 billion a year) until 2018.
In a speech before the lawyers attending the 10th National Convention of the Integrated Bar of the Philippines in April 2005, then Supreme Court Associate Justice (now Chief Justice) Reynato Puno urged the government to consider stopping payments for loans that Ferdinand Marcos borrowed to build the nuclear power plant. He said that bankers who lent to corrupt governments can be held liable for graft.
Having worked in several financial institutions in the past, I am aware of the stringent procedures and requirements that banks impose upon their officers and the prospective borrowers to ensure that the project to be financed is viable and that the loan exposure will be duly repaid. The procedures painstakingly crafted in the operating manual is shortened or, worse, discarded when institutions or organizations begin to play “sweet music” with officials in government, on transactions entered into with motives purely for personal gain.
Meanwhile, foreign debt expenditure continues to get the largest chunk of our national budget. Presidential Decree 1177, issued by President Marcos on July 30, 1977, ensures the automatic appropriation of payments for principal and interest on public debt. This law needs to be reexamined because we are in a deepening state of crisis and this practice, if allowed to flourish, will put us deeper into quagmire.
While countries should honor commitments, including public debts, it is the right of the people to scrutinize the legitimacy of the debts, especially if the government concerned is notorious for corruption, repression and unimaginable despise for transparency and accountability. What is the morality indeed of paying for debt burdens incurred by officials for reasons other than for public welfare?
The legal doctrine of odious debt or “dettes odieuses” is pertinent. It was formulated by Alexander Nahum Sack, a law professor. He says that:
“If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State.
“This debt is not an obligation for the nation; it is a regime’s debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.
“The reason these ‘odious’ debts cannot be considered to encumber the territory of the State, is that such debts do not fulfill one of the conditions that determine the legality of the debts of the State, that is: the debts of the State must be incurred and the funds from it employed for the needs and in the interests of the State.
“‘Odious’ debts, incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the latter — in the case that the nation succeeds in getting rid of the government which incurs them — except to the extent that real advantages were obtained from these debts. The creditors have committed a hostile act with regard to the people; they can’t therefore expect that a nation freed from a despotic power assume the ‘odious’ debts, which are personal debts of that power.”
To avoid arbitrariness in the determination whether a loan is legitimate or not, Professor Sack proposed that a new government be required “to prove that the debt ill-served the public interest and that the creditors were aware of this.
Following these proofs, the onus would be upon the creditors to show that the funds were utilized for the benefit of the territory. If the creditors could not do so, before an international tribunal, the debt would be unenforceable.”
Recently, the President vetoed the provision in the General Appropriations Act which put on hold interest payments for questionable loans, including that which funded the substandard medical waste incinerators installed in 26 hospitals run by the Department of Health (DOH). It was reported that, in the Illegitimate Debt Forum Series, members of the broad network called People Against Illegitimate Debt (PAID), such as Health Care Without Harm, Freedom from Debt Coalition, and Eco Waste Coalition, revealed that in the national budget passed by Congress, the payments for interests of “illegitimate debts” were realigned instead to finance social services, thereby augmenting the budget of the DOH by P6.812 billion for a total of P18.9 billion. However, this was axed by the President.
It is high time to constitute a multi-sector body that will scrutinize the legitimacy of the so-called “public debts.” Else, we will create perpetual “free riders” from the public and private sectors who are never held accountable for ransacking the public treasury.
Meanwhile, in bold defiance of the Constitution, should we again conveniently forget prioritizing the budgetary allocation for the education of the future leaders of this land?
