Anything that would reduce the country’s crippling debt burden without shaking financial markets, however, deserves support. De Venecia is asking lenders to convert half the debt service receipts into equity in development and anti-poverty projects that are being undertaken by the Philippines and other debtor countries to meet UN Millennium Development Goals. This is not debt cancellation or forgiveness, De Venecia emphasized.
The country’s foreign debt has ballooned to $55 billion. Servicing this debt eats up the largest chunk of the annual national budget, with much of the money going to debt repayment for a $2-billion white elephant, the Bataan Nuclear Power Plant. The international community, however, has always reacted negatively to attempts by any nation to impose caps on debt servicing.
Several other proposals have been put forward to reduce debt stock, such as debt-for-nature swaps. Reports yesterday said the Asian Development Bank has shown interest in discussing De Venecia’s proposal, which will also be presented to the International Monetary Fund, the World Bank and other lending institutions. President Arroyo is expected to formally present the proposal to the United Nations General Assembly as a Philippine initiative next month.
Massive foreign debt has hobbled development in much of the Third World. Money that should go to basic services such as education and health care are being eaten up by debt payments. For many countries, interest payments grow bigger each year, compounding the problem. Poor countries are in dire need of easing their debt burden. Any proposal for debt relief must be pursued.