Government urged to swap debts for reconstruction projects

MANILA, Philippines - Former Socioeconomic Planning Secretary Ralph Recto has urged the government to ask creditor countries to swap sovereign debts for disaster-relief expenditures for reconstruction projects.

Recto, who also once headed the National Economic and Development Authority (NEDA), said the “debt-for-disaster relief” program would free up billions in pesos earmarked for debt servicing or for future borrowings to rehabilitation effort every time a crippling disaster strikes the archipelago.

“For a change, let’s make our typhoons work for us,” he said, adding that the money spent to service debts could be spent on disaster rehabilitation.

Recto said the Reconstruction Commission created for typhoons Ondoy and Pepeng rehabilitation could spearhead the negotiation with multilateral lending institutions and creditor nations to grant the Philippines a debt reprieve.

He said foreign creditors may just charge the billions that the government will spend on typhoon rehabilitation to the country’s outstanding debts or by crediting this as part of their relief assistance to the country.

The Reconstruction Panel headed by Finance Secretary Margarito Teves has so far received pledges of more than $5 billion in loans and grants from local and international funding agencies for the rehabilitation and reconstruction of infrastructure projects damaged by the typhoons last year.

Recto nevertheless said such amounts may already be entered as “debt payments” in the books of foreign creditors and multilateral lending agencies since these will directly go to typhoon rehabilitation work.

He said a similar “debt swap” movement is emerging today as poor nations haggle debt concessions from their foreign creditors in exchange for taking care or nurturing their fast depleting-environment.

Recto expressed hopes the government would consider his suggestion, saying that the Philippines needs all the help it can get.

“For every devastation like floods, earthquakes and drought, we get debt credits. The country seems to be a catch basin for typhoons and other natural calamities that we’re running on a surplus of it,” he said.

According to government estimates, the cost of the two typhoons has already reached P38 billion.

But the lingering impact is seen to drag on until this year that government has already factored in the prolonged typhoon-related reconstruction work to a widened deficit target of at least P293 billion this year or just similar to the emerging funding shortfall for 2009.