With the filing of Senate Resolution 57, nine senators chopped their 2005 pork by half. Led by Francis Pangilinan, these senators have finally come to realize the people’s disgust for the pork barrel by setting the example in helping avert the country’s huge budget deficit, which is expected to reach P200 billion this year. Saving P2.4-B may seem like a drop in the bucket compared to the deficit, but it is a good way to start. Clearly, chopping pork isn’t enough to get us back in the black.
Ping Lacson and Bong Revilla are for the total scrapping of the euphemistically-named Priority Development Assistance Fund (PDAF). For two years now, Ping Lacson has not utilized any of his PDAF. Sen. Serge Osmeña echoed Ping’s call but only if everyone else will do it. Senate Resolution 57 has spawned yet again another word war among legislators. Ping Lacson called the proposed 50 percent cut as a "half-hearted" gesture while Pangilinan labeled Lacson’s proposal as "ideal, but unrealistic." Congressmen on the other hand still have to make up their minds as to how much they should chop their pork funds. Their condition is that they should have a say in its future allocation.
If I recall correctly, Joe deV, known for his "hocus-pocus" creative problem-solving ideas, came up with several optimistic solutions to manage the country’s debt problem as far back as 1987. One of them is debt for equity, where the creditor can convert the debt into capital for a new investment; debt-for-debt or what is normally known as offsetting. For instance, if a government facility owes creditor Bank A who in turn owes creditor Bank B, Bank A can settle his debt to Bank B by transferring the government facility’s debt to Bank B. Then there is the debt-for-nature scheme, where a creditor who happens to be a nature lover will help develop a certain area rich in natural resources, in the process attracting investors to the said area, giving the debtor an opportunity not only to pay off the debt but creating an avenue for a new business opportunity as well. In the past, we have resorted to restructuring to manage our debt burden, using the 5 over 15 scheme where we get a grace period of 5 years and 15 years to pay, the 10 over 10 or even the 15 over 5 scheme. If creditors agreed to such arrangements before, perhaps it can be done again. I myself am not very clear about these schemes. If you’re as confused as I am then maybe we can ask Joe deV to explain it himself. By the way, he and Frank Drilon will be our guests at the MOPC’s Congress Night on Sept. 22.
To most Filipinos, the fiscal crisis seems so distant until it begins to impact their daily lives. Already prices of food have gone sky-high. These are the symptoms before a fiscal crisis becomes full-blown. Money that should go to the delivery of basic services and infrastructure is already being cut substantially for debt service. Creditors are thinking twice before giving us new loans and if they do, the interest rates will be higher, which could lead to a sharp peso depreciation. Further, the loss of investor confidence will lead to capital flight, which will translate to a higher unemployment rate and recession. Clearly, this mix of high unemployment rate, high inflation and a low purchasing power for the people is a potent brew for chaos. We only have to recall what happened to Argentina, Brazil, and other Latin American countries when they defaulted on their loans. We don’t even want to predict the kind of poverty, food riots, and bank riots that will occur if this crisis is not defused.
The UP professors gave us a rude awakening last Monday by warning that we will go the way of Argentina in two years and by prescribing the bitter pill that the government should consider as a major solution to the fiscal crisis. GMA did her part by acknowledging it to get everyone’s heads out of the sand and face up to it. The best analogy for our situation is like a man in a quicksand. He still has a chance to get out of it alive if he acts quickly and gets help. The more he moves and tries to go it alone, the deeper he sinks. GMA was right in sounding the alarm and asking for everybody’s help. Since the late 1970s, we have been living beyond our means. This is merely a consequence of years of denial. Finally, we have realized that profligacy has caught up with us. Of course, this has affected the country internationally. At this point, it is crucial for our financial managers to launch a roadshow to explain and reassure creditors and investors that we’re coming up with effective solutions. More importantly – we are going to seriously implement them. Initially, the key to forestalling the fiscal crisis lies in the resolute political will of the public sector.
Just like the latest South Beach diet fad authored by Dr. Arthur Agatston – we just have to start trimming off the fat. To do so, we need the will and the discipline to control our appetites, cut out the "pork", and work our way down to manageable levels. Once we trim down looking fit and attractive to investors, then we’re off to scale greater heights.
What is important is for all sectors to take this crisis seriously because absolutely no one is exempted. If the rich think that they can insulate themselves, they are seriously mistaken. They will be like islets of comfort in a sea of poverty. They may have their golden fortress, but in the end they will effectively be prisoners in their own castle. Protecting themselves in their enclaves will not be possible once this fiscal holocaust begins. When the poverty rate triples, all hell breaks loose. The elite is expected to make the most sacrifices because obviously the poor don’t have anything more to lose or to give, except their lives. Everyone just has to do their part. Failing this, we may all end up not having dining tables for our pork chops.