In-debt-pendence: a brief history of Philippine foreign debts and structural adjustments
June 12, Independence day passed in the midst of the Duterte administration’s external debt grows to approximately $84 billion. It begs the question, after all these decades, is the Philippines truly independent to push for policies benefiting its own people, or are our daily lives affected by programs under the sway of our foreign debtors? After all, if these debts are used for projects and programs to benefit the Filipino people, they shouldn’t be necessarily bad, right?
A new type of colonialism
“They generally called for programs and policies which advocated privatization of key sectors, liberalization of trade, deregularization and denationalization of businesses to benefit foreign capital.”
The World Bank was founded in 1944, with the International Monetary Fund following the year later. These institutions, strongly held by the US government, would be crucial in the spiral of debt the Philippines government would fall into.
At the end of the second world war, even if the American government allowed political independence to the Philippines, several treaties were signed which allowed it to retain and own new assets in the country.
While loans from the Bank and the Fund were not heavily flooding at the the beginning of the new republic, dollar reserves started to drain, which were countered by measures of control. But by ’62, Macapagal had loosened the control measures, which were met with approval by American interests when they granted a loan of $300 million. With the ensuing deficit from massive foreign capital flooding the Philippines, the external debt jumped from $275 million in 1962, to nearly $1 billion at the start of Marcos’ regime.
In 1968, former US Secretary of Defense Robert McNamara became president of the World Bank, and started to push bigger loans to third world countries like the Philippines, thinking this would mean that the country would not tip over to the socialist camp.
From 1973 to 1981, $2.6 billion was loaned externally to pay for 61 projects which sought to liberalize our trade by eliminating or decreasing tariffs on foreign goods, devaluation of the Philippine peso, and building export processing zones in line with the export-oriented import-dependent economics the Bank and the Fund, (with the US government’s blessings) had for us.
By the time of his ouster in 1986, the external debt of the Philippine government rose to $28 billion, which the Filipino will continue to pay till 2025.
But in 1980, the Philippines received another loan of $200 million from the IMF, as part of its new Structural Adjustment Program (SAP). No longer just funding projects, the IMF started to give loans on the basis of changing programs that aimed to further liberalize our economy, making us more vulnerable when competing against big modernized nations in the waters of free trade. Despite no longer being called as SAPs, the IMF continues to fund such programs.
These structural adjustment programs which pushed for neoliberal reforms, continued on throughout the presidencies of Cory Aquino, Fidel Ramos, Joseph Estrada, Gloria Macapagal-Arroyo, Nonoy Aquino, and Rodrigo Duterte. They generally called for programs and policies which advocated privatization of key sectors, liberalization of trade, deregularization and denationalization of businesses to benefit foreign capital.
Economic Free fall
“Even with these massive funds, the economy is falling down a spiral.”
Taking on the Marcos’ debt as well as implementing neoliberal reforms caused Cory Aquino in 1987, to use up 50% of the budget to paying off the national debt (which includes local debt), and cut back on social services.
For committing to neoliberalism, the World Bank loaned out $300 million in that year, as well as another $200 million in 1988. By 1992, the World Bank had already loaned out $1.3 billion for structural adjustment programs in finance, with the US government threatening to cancel these deals should Aquino close the American military bases on our shores. By her term’s end, the external debt had still risen to $30 billion.
By the end of Ramos’ term in 1998, the external debt had risen to $46 billion, and he had sold off key companies like Petron, Philippine National Bank, and Philippine Airlines to the private sector.
Estrada fared no better in his brief tenure, with the external debt reaching to $52 billion by the end of 2001.
GMA borrowed more money than the previous three combined, with the external debt being $64.73 billion by 2009.
Her successor, Noynoy Aquino, ended his term with $77 billion in external debt, and the pushing of PPPs or Private Public Partnership, which was in keeping with World Bank-IMF directives of accelerating infrastructure development in third world countries, while also negating negating industrialization in these nations.
With Duterte’s presidency, he not only loaned from old masters like the World Bank, the IMF, or the ADB, but also to rising foreign powers like China. He continued the adjustment programs from his predecessor like K-12, and approved tariff reforms for liberalization.
Like Marcos, Duterte borrowed money externally again to fund massive infrastructure projects in the face of Build, Build, Build. As of November 2019, it had received $8.47 billion in foreign financing from countries like China and Japan.
By continuing the financial policies of past regimes, slashing of budgets for social services, research and development, as well as slow implementation of travel bans, the nation was caught more ill-prepared for the Covid-19 crisis.
Despite the funds granted by the emergency powers, Duterte has been continuously from foreign powers for COVID-19 response funds, as well as an additional $500 million from the World Bank, among many others. As of June 2020, the national debt is ₱8.6 trillion, or $170 billion, with a still ballooning external debt of around $84 billion.
Even with these massive funds, the economy is falling down a spiral — exacerbated by the Duterte regime’s response to the COVID-19 pandemic; as massive unemployment, MSME bankruptcy, lack of efficient medical solutions, among others, plague the situation.
Ending the free fall and the road to economic independence
If the history of the post-war Philippine government has shown anything, it’s that our economic dependence on foreign countries and institutions makes our policies subservient to their interests. No matter how the government commemorated Independence day, it is mockery for it to do so when its policies and programs all need the funding and blessing of foreign powers.
The free fall into debt colonization continues as projects for heavy industries — the crucial step of industrialization which is necessary for us to modernize, have been continuously curtailed. Favor lies in policies of liberalization of trade, privatization, deregularization, and denationalization of key sectors and assets, to the benefit of already big players like America, Japan, and China. These reforms have only caused debt crises, currency devaluation, mass unemployment, rampant migration of the labor force, falling wages, rising prices, and slashes in the budgets of social services as these become more privatized.
Duterte’s economists point to the debt-to-GDP ratio in their attempts to calm us that the country is not fully falling in debt. However, the numbers don’t lie, and our total debt figure has risen 10.5%. To put that into perspective, that is 5 times more than the number at the start of the Duterte presidency. This debt crisis is happening at a time when the government has been incurring a huge budget deficit coming from last year.
Politically it has caused the government to resort to repression of civil and human rights, union busting, and rampant militarization. The state is turning to fascism as its solution, while maintaining the free fall in debt.
The true measure of a nation’s independence lies in its sovereignty to implement policies for the benefit of its people, without the heavy handed interference of other nations.
Towards a more sovereign nation, and for the benefit of the Filipino people, we should continue to advocate and ally ourselves with groups that push for economic independence. The illusions of the regime’s neoliberal dependence on foreign powers are quickly being dispelled, especially with the COVID-19 pandemic.
We need a state that will advance projects to begin modernization and industrialization of the nation’s economy, as well as call for the cancellation of illegitimate debts, and unequal treaties.
Only once we march through this path, can we see a future where we can call ourselves independent without doubt or hypocrisy.
