Former BSP chief says no to debt repudiation

Former Bangko Sentral ng Pilipinas (BSP) Governor Gabriel C. Singson lashed out yesterday at proponents of debt repudiation, saying this would only lead to a scenario close to Argentina’s experience.

In a forum sponsored by the Management Association of the Philippines (MAP), Singson said debt repudiation or moratorium is "not feasible at this time." In 1983, the Philippines declared a debt moratorium and Singson was then governor of the Central Bank of the Philippines.

"That move was more damaging to the Philippines than the 1998 Asian financial crisis," he said.

From a foreign exchange value of 9.20 to a US dollar, the peso plunged to 18.20 in less than a year.

"We stopped paying our debts, but we could not source new funds for growth," Singson said, who is presently a senior consultant and director of JG Summit Holdings Inc.

If the country took a debt moratorium or repudiation stance today, the country’s $30-billion ROP bonds and loans would be endangered, he stressed.

"Ten billion dollars of the total ROPs are in coupons held by both the private and government sectors, and $6 billion of these are held by domestic banks funded mostly by foreign currency deposit units (FCDUs)," Singson pointed out.

All that would be defaulted with a debt repudiation and that would result in bankruns, "and the rest is what happened in Argentina," he said.

Meanwhile, Singson’s recommendations for the country’s economic ills fell in line with those presented by the World Bank.

That means adjustments in utilities rates, tax reform measures, and the revenue measures such as the sin tax, value-added tax, and natural attrition law.

"The urgent message is fiscal consolidation and public debt reduction to get back the foreign investors’ and lenders’ confidence," the former BSP head said.

In contrast, University of the Philippines (UP) professor Walden Bello called for "hard negotiations" with the country’s debtors.

"Aside from new revenue-generating measures, the country should negotiate and negotiate hard in the hope of freeing some of the revenue for development purposes," Bello said.

He added that when the country negotiates, "it should have the political will to either devalue debt or peg all debt interest payments at a single level."