President Gloria Arroyo acknowledged for the first time Monday that the Philippines was now in a "fiscal crisis," as economists warned of an Argentinian-type debt default within the next three years.
"We are already in the midst of a fiscal crisis and we have to face it squarely," Arroyo said in a written statement.
PHOTO: EPA
Budget Secretary Emilia Boncodin said Arroyo had ordered aides to "evaluate the proposal to declare a state of fiscal crisis."
Such a declaration would allow the president to withhold, for a limited period, the release to local government units of a portion of the 30 percent of taxes collected by the government that is alloted to them by law.
Aides earlier rejected Philippine comparisons with Argentina's debt woes, saying Manila was still paying down its obligations. Buenos Aires defaulted on its public debt in January 2002 amid violent street riots.
A group of University of the Philippines economists warned a likely uptick in global interest rates will make it much costlier to repay the government's overseas debt raising the risk of default within the next two or three years.
"This [threat of non-payment] would result in a sharp cutback in subsequent credit, particularly from foreign lenders, and precipitate a crisis such as that Argentina or Turkey experienced," said the group, who include ex-cabinet members Benjamin Diokno, Felipe Medalla, Solita Monsod and Gerardo Sicat.
Manila last fell into a debt hole in 1983-1984, when it defaulted on sovereign obligations and was cast off from the international financial markets.
"While the economy is not yet on the brink at this time, it can probably afford at most three years to avert such a crisis -- with possibly a year at most to convince financial markets it is doing something to reverse the situation," the paper said.
Government debt has more than doubled since the mid-1997 Asian crisis to 3.36 trillion pesos (US$60.32 billion), or 130 percent of the gross domestic product (GDP), the paper said. Half of it is in local currency.
Defaulting on even the domestic portion would cause "major difficulties and bankruptcies for the domestic banking system" and "ruin millions of depositors," which would lead to "severe economic contraction, causing thousands of bankruptcies and throwing millions onto the streets," the paper said.
The professors said these scenarios "are being fended off only" by the billions of dollars in annual remittances of the Philippines' seven million-strong overseas work force.
But this could be reversed by "any large external shock, such as a sustained increase in world oil prices, or a sharp fall-off in workers' remittances, or, ironically, even rapid growth that caused the import bill to rise."
They said Manila should at the bare minimum raise 150.6 billion pesos more a year through fresh taxes and higher motor vehicle registration fees as well as by reducing funds alloted to local governments and cutting by half the pork barrel, or discretionary funds, allocated to legislators.
Meanwhile, despite speculation that Arroyo would replace some of her economic managers, the government announced Monday that she had decided to retain her existing team consisting of Budget Secretary Emilia Boncodin, Economic Planning Secretary Romulo Neri, Finance Secretary Juanito Amatong and Trade Secretary Cesar Purisima.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique