Economic managers nix P3.5-B bailout plan for Quedancor

Government economic managers have shot down a proposal to bail out the state-run Quedan and Rural Credit Guarantee Corp. (Quedancor), arguing that the agency has not been a significant factor in pump-priming the economy.

Sources at the Finance Department said economic managers want Quedancor to be deactivated and not be bailed out by P3.5 billion as what the agency is seeking.

A source said it would not be practical for the government to continue the operations of Quedancor because it has been losing money for several years now due to mismanagement.

“Why would we bail out an agency that is losing money?” the source pointed out.

In 2007, Quedancor had a net loss of P286 million and in 2006, a net loss of P23 million.

Quedancor, which is mandated to facilitate credit to the countryside, is opposed to the proposed deactivation. Instead, the agency wants a P3.5-billion bailout package which officials said would make Quedancor sustainable.

The government has yet to finalize the phase-out plan for Quedancor but the Department of Finance favors a bailout of P475 million instead of the proposed P3.5 billion.

The P475 million would be used to pay the obligations of Quedancor to its creditors. After which, the government would phase out or deactivate the agency.

Earlier, Finance Undersecretary Jeremias Paul Jr. explained that the P475 million, which will be in the form of equity infusion, will help Quedancor pay its past due obligations to various creditor banks.

“We need to pay off the creditors. We need to negotiate with our creditors. We don’t have the legal basis to pay off the obligations so it will be in the form of equity infusion,” Paul said.

The country’s economic managers believe that it would be better for the government to put the money in another agency that would have the same mandate but be more prudent with its funds.

Quedancor employees appealed to President Arroyo to retain the agency.

“Most of us, after serving the government for more than two decades are faced with the eventuality of unemployment should our beloved corporation collapse,” the 1,200-strong Quedancor Employees Association Inc. said in a letter to Mrs. Arroyo.