Debt Situation

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Ov er v iew o f t h ePh i l ipp in e Deb t Si t u a t ion

Fr eedom f r om Deb t Coa l i t i om

April 29, 2008



Out l ine ( 1 )

Philippine Debt Profile – 2007

Snapshot of Total Philippine Debt

Public Debt - Focus on National Government External

Debt NG Debt External

(to be added later: Closer look at Domestic Debt;Breakdown of GOCC Debts and GFI Debts)

Philippine Debt Through the Years

Consolidated Public Sector Debt

National Government Debt

NG Debt External Fiscal Situation and Fiscal Impact of the Debt

Arroyo, Debt and the Fiscal Crisis

National Government Contingent Liabilities



Out l ine ( 2 )

Brief History of Debt Restructuringand Debt “Relief” Schemes

Relevant Laws on the Debt andBorrowings

Relevant Policies Relevant Laws



Ph i l ipp in e Debt Pr o f i l e – aso f 2 0 0 7



PUBLI C PRI VATE

EXTERNAL

DOMESTI C

Ph i l i pp in e Deb t



Ph i l i pp ine Deb t ( end -Q3 , 20 07 )i n t r i l l i on pesos , b i l l i on do l la r s

TOTALPhp 5 .14 4 T

US$ 1 1 1 .5 1 B

Domestic DebtPhp 3 .33 5 T

US$ 72 .30 B

Foreign DebtPhp 1 .809 T

US$ 39 .21 B

Public DebtPhp 4 .21 9 T

US$ 91 .47 B

Ph P 2 .5 4 0 T Ph P 1 .6 7 9 T

US$ 5 5 .0 7 B US$ 3 6 .4 0 B

Private Debt

Php 0 .92 5 TUS$ 20 .04 B

Ph P 0 .7 9 5 T Ph P 0 .1 3 T

US$ 1 7 .2 3 B US$ 2 .8 1 B

Public Debt taken from DoF’s Consolidated Public Sector Debt Private Foreign Debt was taken from BSP’s Private External Debt

Private Domestic Debt was taken from BSP’s FCDU loans of private residents Foreign Exchange Rate was pegged at BSP’s end-September 2007 rate:

US$1=PhP46.1315



Pu b l ic Deb t



PUBLI C

NATI ONAL GOVERNMENT ( NG)

GOCCsGovern m en t Ow ned and Con t ro l l ed Co rp s

Pu b l ic Deb t

GFI sGo ve rn m e n t Fi n a n cial I n s t i t u t i o n s

Exte rna l Domes t i c



Nat i on al Gove rn m en t

Deb t ( NG)



( i n t r i l l i on p esos , b i l l i on US do l l a rs , us ing US$1 = PhP41.6 )

NG Outstandingend 2007

Php 3.712 T US$ 89.24 B

Domestic (by instruments) Php 2.201 T US$ 52.91 B

Treasury Bills 0.614 14.76

Treasury Bonds/Notes 1.565 37.61Loans 0.022 0.54

Others 0 0.00

Foreign (by creditors) Php 1.511 T US$ 36.33 BMultilateral 0.226 5.44

Bilateral 0.354 8.51

Commercial 0.033 0.80

Foreign Denominated Securities 0.898 21.58

NG Contingent Liabilities 0.484 11.64Domestic Debt 0.065 1.56

Foreign Debt 0.419 10.08

Source:Bureau of Treasury SDAD

Note:Break-down oftotalsmay notadd up

due toroundingof digits



Nat iona l Gove rn m en t Deb t( NG) - Ex t er na l



M u l t i l a t e r a l

B i l a t e r a l

C o m m e r c i a l

B o n d s O t h e r s

4.746.29

0.50

19.35

0.19

-

2.00

4.00

6.00

8.00

10.0012.00

14.00

16.0018.00

20.00NG External Debt (per lender type)

in billion US$, as of end 2007



NG Ex t e rn a l Lend ers - Mu l t i l a t e ra l

Asian Development Bank (ADB)European Union (EU) European Investment Bank (EIB)

OPEC - Organization ofPetroleum ExportingCountries

OPEC Fund for International Development (OFID)

United Nations (UN) International Fund for Agricultural Development (IFAD)

World Bank (WB) International Bank for Reconstruction and Development (IBRD)

International Development

Association (IDA)



3,043.43

15.95 7.25 28.62

1,474.30

172.35

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

ADB EIB OFID IFAD IBRD IDA

NG Multilateral Debt by Lendersin million US dollars, as of end 2007



Debt s cla im ed by ADB in p e rcen t age

40%

17%

7%

6%

6%

8%

5%

4%

2%2% 2% 1%

Finance 40%

Infrastructure 17%

Multiple Agency 7%

Energy 6%

Transportation 6%

Agriculture 8%

Environment 5%

Education 4%

Micro-credit 2%

Agrarian Reform 2%

Health 2%

Others 1%



NG Debt Ex t e r n a l Lend er s - Bi la t e r a l

Australia Export Finance and Insurance Corporation (EFIC)

Austria Bank Austria AG

Belgium Government of Belgium

Belgium(via Paris Club)

Paris Club Account without Peso Blocked Deposit w/ BSP

Brunei Brunei Investment Agency

Canada Canadian Agency for International Development (CIDA)

Export Development Corporation (EDC)

China China Export Import (EXIM) Bank

China National Constructional & Agricultural Machinery

import & Export Corporation (CAMC)

Denmark Danish International Development Agency (DANIDA)

France French Protocol Loans

Germany Kreditanstalt fuer Wiederaufbau (KfW)



Italy Italian Protocol LoansMediocredito Centrale (MCC)

Japan Japan Bank for International Cooperation (Japan

EXIMBANK and OECF, and via Paris Club)Kuwait Kuwait Fund for Arab and Economic Development

(KFAED)

Paris Club Paris Club Account without Peso Blocked Deposit w/ BSP

Saudi Arabia Saudi Fund for Development (SFD)

South Korea Korean Export-Import (KEXIM) Bank

Sweden Swedish International Development CooperationAgency (SIDA)

United States

(US)

Public Law 480

United States Agency for International Development(USAID)

NG Debt Ex t e rn a l Lender s – Bi lat e ra l p2



5,302.40

354.75190.99 115.06 87.81 60.12 54.58 61.66

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

Japan United

States

(US)

Austria France China Canada Australia South

Korea

NG Bilateral Debt, By Country Top 8(in million dollars, as of end 2007)



Deb t s Claim ed by Japan i n % , en d y ear 2 0 0 7

46%

26%

11%

5%

4%

4% 2%1%1%

Infrastructure 46%

National Govt 26%

Transportation &Communication 11%

Agriculture 5%

Education 4%

Agrarian Reform 4%

Science & Technology 2%

Environment 1%

Others 1%



NG Ex t e r n a l Lend er s - Com m er cia l

AustraliaNew Zealand

ANZ/Export Finance and InsuranceCorporation

Austria Raiffeisen Zentralbank (RZB) Österreich AG

France Credit Commerciale de France

Germany Deutsche Bank AG

Netherlands ABN-AMRO Bank

Spain Banco Bilbao Vizcaya

Banco Santander

United States (US) Bank of America Corporation (BAC)



58.2249.76

6.69

347.25

24.6918.33

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

ANZ/ExportFinance and

InsuranceCorporationAustralia-NZ

RaiffeisenZentralbank

(RZB)ÖsterreichAG Austria

CreditCommerciale

de France

DeutscheBank AG

Germany

ABN-AMROBank

Netherlands

Banco BilbaoVizcaya

Spain

NG External Debt Commercial Banks, Top 6in million US dollars, as of end 2007



Debt Cla im ed by Deu t sch e Bank , in %

9%

8%

24%9%

38%

12%

Salam Bridge 9%

Tulay PanguloMagsasaka Project 12%

Tulay Pangulo para sa

Magsasaka 8%

Tulay ni Erap saBarangay 24%

Tulay ng Pangulo saKaunlaran 9%

Tulay sa Szopad 38%



DA DECS

DENRDOF

DOTCDPWH

RP (NG)

2007

22,735.80

3,379.89

1,036.761,185.62

527.75

486.07456.79

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00NG External Debt by Agencies,Top 6in million US$ as of end 2007



Ph i l i pp in e Deb t

Th r ou gh t h e Year s



Conso l ida tedPub l ic Sect o r Deb t – t h r oug h t h eyea rs



Public Sector Debt(in billion pesos, nominal)

1,913 1,949 2,167 2,237

2,6692,952

3,666 3,6243,850

4,369

5,0745,289

5,034 4,944

-

1,000

2,000

3,000

4,000

5,000

6,000

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

Ramos Estrada Arroyo



Public Sector Debt(in billion pesos, nominal)

-

1,000

2,000

3,000

4,000

5,000

6,000

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6


External

Domestic



Public Sector and National Government Debt(in trillion pesos)

0

1

2

3

4

5

6

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6


Total Public Sector Debt

Total National Government Debt

30%



-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Public Sector Debt Growth Rate

National Government Debt Growth Rate

Total Public Sector Debt and NG Debt Growth Rate, in %



Growth rate of CPS – steep rise in recent

years under GMA

Decrease from 2004 to present – factors: Forex Rate

Pre-payment

Less Borrowings

Relevant Developments: NPC Borrowings (account for big part of GOCC

debt) – impact on ratio of NG and Non NG debt;Assumption of NPC liabilities after privatization –must take a look at impact

From 1999 to 2000: Huge drop in domestic debtand increase in external conflict with data

released earlier – changes in recording system?



NG Deb t t h r oug h t h e year s



Outstanding Debt of the National Government(in billion pesos, nominal)

-

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

Aquino Ramos Estrada Arroyo

ForeignDebt

DomesticDebt



Outstanding Debt of the National Government(in percentages)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


ForeignDebt

DomesticDebt



After 1986 (post Marcos period) – increase

in domestic debt vs external Factors:

During Aquino period, more difficult toborrow from external sources thanborrowing domestically;

Eventually, restoration of credit rating,hence heavy external borrowing; butalso heavy domestic borrowing – capital

available ?? Buyers of domestic bonds may also

be subsidiaries of foreign banks



NG Outstanding Debt(in billion pesos, 1985 prices)

-

100

200

300400

500

600

700

800

900

1,000

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7




Sharp increase in first 3 years under

GMA

Decrease from 2004: Foreign Exchange rate – peso value of

US Dollar denominated debts are lower

Lets look at trend if denominated in

US Dollars …..



NG Outstanding Debt(in billion dollars, 1985 prices)

-

5

10

15

20

25

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7




Outstanding NG Debt as % of GDPusing nominal values

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1

9 9 0

1

9 9 1

1

9 9 2

1

9 9 3

1

9 9 4

1

9 9 5

1

9 9 6

1

9 9 7

1

9 9 8

1

9 9 9

2

0 0 0

2

0 0 1

2

0 0 2

2

0 0 3

2

0 0 4

2

0 0 5

2

0 0 6

2

0 0 7




Outstanding Public Sector Debt as % of GDPusing nominal values

0%

20%

40%

60%

80%

100%

120%

140%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006




NG Debt to GDP from 2004 seem toindicate improvement – as GDP hasbeen increasing….

NG debt per capita – very steep rise,

and only small decrease since 2004



Outstanding NG Debt per Capitain thousand peso, nominal

-

5

10

15

20

25

30

35

40

45

50

1 9

9 0

1 9

9 1

1 9

9 2

1 9

9 3

1 9

9 4

1 9

9 5

1 9

9 6

1 9

9 7

1 9

9 8

1 9

9 9

2 0

0 0

2 0

0 1

2 0

0 2

2 0

0 3

2 0

0 4

2 0

0 5

2 0

0 6

2 0

0 7




Public Sector Debt per Capita(in thousand pesos, nominal)

-

10

20

30

40

50

60

70

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


R l P C it I d R l NG D bt C it



Real Per Capita Income and Real NG Debt per Capitain thousands of pesos

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1 9 9

0

1 9 9

1

1 9 9

2

1 9 9

3

1 9 9

4

1 9 9

5

1 9 9

6

1 9 9

7

1 9 9

8

1 9 9

9

2 0 0

0

2 0 0

1

2 0 0

2

2 0 0

3

2 0 0

4

2 0 0

5

2 0 0

6

2 0 0

7


GDP Real (1985 prices) per capita

NG Debt (1985, prices) per capita

R l P C it I d R l NG D bt C it



Real Per Capita Income and Real NG Debt per Capitain thousands of dollars

-

0.10

0.20

0.30

0.40

0.50

0.60

1 9

9 0

1 9

9 1

1 9

9 2

1 9

9 3

1 9

9 4

1 9

9 5

1 9

9 6

1 9

9 7

1 9

9 8

1 9

9 9

2 0

0 0

2 0

0 1

2 0

0 2

2 0

0 3

2 0

0 4

2 0

0 5

2 0

0 6

2 0

0 7


GDP Real (1985 prices) per capita

NG Debt (1985, prices) per capita



Ch anges i n t h e st r u ct u r e o fNG Ex t er n a l Debt ...



Sh o r t t er m d eb t v s m ed iu m an d l on g

t er m deb t ; Ri se o f bon ds andf i nancial i n st r um en t s

The government is on a drive torestructure old debts, and “improvedebt manageability”.

Continuing the post-Marcos policy andIMF-WB prescription of

preferring medium-to-long term debtsover short-term debts,

preferring financial market instruments

such as bonds over other forms of loans.



Shor t , Med ium and Long Te rm Deb t as %of Ex t e rn a l Deb t

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

Marcos Aquino Ramos Estrada Arroyo

Medium and Long-Term

Short-Term

Source: Bangko Sentral ng Pilipinas



NG Ex t e rn a l - Sh or t , Med iu m and Lon g

Ter m Deb t , i n b i l l i on do l l a rs

-

10.00

20.00

30.00

40.00

50.00

60.00

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Medium and Long-Term

Short-Term




Ch ang es in Cr ed i t o r Pr o f i le

Types of Debt as % of Total External Debt

0%

20%

40%

60%

80%

100%

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Multilateral

Bilateral

Bondholders /Noteholders

Banks andOther FIs

Suppliers

Others




National Government External Debt:

NG Direct

Foreign Denominated Securities

NG Assumed Liabilities

NG EXTERNAL DEBT OUTSTANDI NG i n b i l l i on p esos



-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Assumed

Foreign DenominatedSecurities

NG Direct

NG EXTERNAL DEBT OUTSTANDI NG, i n b i l l i on p esos ,

n o m in a l va l u es



Assu m ed Liab i l i t i es o f t h e NG

Significant portion – immediatelyafter the Marcos years (large part of

it is assumed liabilities of privatesector, based on sovereignguarantees of private debts)

Have been reduced over the years

Public guarantees of private risks,liabilities and profits are taken on

different forms

NG EXTERNAL DEBT OUTSTANDI NG i b i l l i US$



-

10

20

30

40

50

60

70

80

90

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Assumed

Foreign Denominated Securities

NGDirect

NG EXTERNAL DEBT OUTSTANDI NG, i n b i l l i on US$,

n o m in a l val u es



Fisca l Si t u at ion an d Fisca lI m p act o f Deb t

I h tibl D bt



1990 NG

Outstanding Debt

+ Borrowings from

1991-2007

1991 to 2007 NG

Debt Service NG 2007

Outstanding Debt

S1

5.355.29

3.71

-

1.00

2.00

3.00

4.00

5.00

6.00

Inexhaustible Debt NG External & Domestic, in billion pesos

Nat iona l Gove rn m en t Bo r r ow ings Deb t



0

100

200

300

400

500

600

700

800

900

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Borrowings

Debt Service

Nat iona l Gove rn m en t Bo r r ow ings , Deb tServ ice ( p r i nc ipa l and i n t erest ) i n b i l l i on pesos, nom ina l




in billion pesos, nominal

0

100

200

300

400

500

600

700

1 9 8

3

1 9 8

4

1 9 8

5

1 9 8

6

1 9 8

7

1 9 8

8

1 9 8

9

1 9 9

0

1 9 9

1

1 9 9

2

1 9 9

3

1 9 9

4

1 9 9

5

1 9 9

6

1 9 9

7

1 9 9

8

1 9 9

9

2 0 0

0

2 0 0

1

2 0 0

2

2 0 0

3

2 0 0

4

2 0 0

5

2 0 0

6

2 0 0

7


Interest Payments

Borrowings

N G Bo r r o w i n g s an d I n t er e st Pay m en t s



Our gross borrowings and our totaldebt servicing (interest plus principal)

are almost at par with each other.

The government is borrowing more

than its deficit because it has to coverfor the principal amortization of debts

which is an off-budget expenditure.

N at i on a l Go v er n m en t Bo r r o w i n g s & t h e



-100

0

100

200

300

400

500

600

700

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Borrowings

Deficit

N at i on a l Go v er n m en t Bo r r o w i n g s & t h eBu dg e t De f i ci t , i n b i l l i on pesos, nom ina l


Nat i on a l Go ver n m en t Bo r r o w i n g s



Nat i on a l Go ver n m en t Bo r r o w i n g s

NG Borrowings (in billion pesos, nominal)

-50

0

50

100

150

200

250

300

350

400

450

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Gross Domestic Borrowings

Gross External Borrowings


Nat iona l Gove rn m en t Bo r r ow ings Deb t



-100

0

100

200

300

400

500

600

700

800

900

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Borrowings

Debt Service - Interest andPrincipal

Deficit

Nat iona l Gove rn m en t Bo r r ow ings , Deb tSer v ice , Bud get Def ici t , i n b i l l i on pesos, nom ina l


D b S i d B i D



Deb t Ser v i ce an d Bor r ow ing s Dr op

The debt to tax ratio became almost 1:1 in2006.

But there was a drop of debt payments and

borrowings from 2006 to 2007 due to the ff:

1 . Less Debt s t o Pay : Pre-payment of Debts: Last 2006, our Government pre-

paid $220 million worth of obligations to the IMF - Notespike in debt service in 2006

2 . The fu r t he r w eaken ing o f t he US Do l la r .

3 . Mor e Revenu es t o Bu r n

Implementation of the 2% increase in RVAT

Privatization of Assets

GDP increase leading to increase in taxes

NG Ex pend i t u r es vs Revenues vs Bor r ow ings




0

200

400

600

800

1,000

1,200

1,400

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Tax and Non-tax Revenues

Total Expenditures

Borrowings

NG Ex pend i t u r es vs Revenues vs Bor r ow ings

NG T & N T R T R




0

200

400

600

800

1,000

1,200

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Tax and Non-taxRevenues

Tax Revenues

NG Tax & Non Tax Reven u es v s Tax Reven u es

Th e Tax Cr u n ch



Th e Tax Cr u n ch

NG Revenues vs. NG Debt Servicing (Principal &Interest), in billion pesos, nominal

-

200

400

600

800

1,000

1,200

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Non-tax Revenues

Tax Revenues

Debt Servicing


The Tax Crunch



The Tax CrunchNG Debt Payments (Principal & Interest) as % of

Revenues

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7




Fiscal I m pact o f NG I n t er est Paym en t s

N at i ona l Gover nm en t I n t er est P a y m e n t s



at o a Go e e t t e est a y e t s

f r om 1 9 8 0 -2 0 0 7 i n b i l l ion pesos, nom ina l

0

50

100

150

200

250

300

350

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Interest Payments

G



Interest Payments as % of NG Budget

0%

5%

10%

15%

20%

25%

30%

35%

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7




Interest payments have been

increasing in nominal terms

Interest payments as percentage of budget – improved since 2005 buthas not gone below the levels during

the 1980’s debt crisis.

Crisis for the lenders – not in terms

of the impact on spending – butwhether you can pay, in full, on time

00NG: To t a l Ex pend i t u r es vs I n t e rest Paym en t s vs



0

200

400

600

800

1,000

1,200

1,400

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Total Expenditures

Social Services

Education

Health

Interest Payments

Tot a l Soc ia l Ser v ices vs Heal t h vs Edu cat ion

Debt per capita vs. Social Services per Capita



p p p pin pesos - nominal terms

-

2,000

4,000

6,000

8,000

10,000

12,000

1 9 8

3

1 9 8

4

1 9 8

5

1 9 8

6

1 9 8

7

1 9 8

8

1 9 8

9

1 9 9

0

1 9 9

1

1 9 9

2

1 9 9

3

1 9 9

4

1 9 9

5

1 9 9

6

1 9 9

7

1 9 9

8

1 9 9

9

2 0 0

0

2 0 0

1

2 0 0

2

2 0 0

3

2 0 0

4

2 0 0

5

2 0 0

6

2 0 0

7


Debt payment per capita

Social service per capita

Debt per capita vs. Social Services per Capita



p p p pin pesos - real terms (1985 prices)

-

500

1,000

1,500

2,000

2,500

1 9 8

3

1 9 8

4

1 9 8

5

1 9 8

6

1 9 8

7

1 9 8

8

1 9 8

9

1 9 9

0

1 9 9

1

1 9 9

2

1 9 9

3

1 9 9

4

1 9 9

5

1 9 9

6

1 9 9

7

1 9 9

8

1 9 9

9

2 0 0

0

2 0 0

1

2 0 0

2

2 0 0

3

2 0 0

4

2 0 0

5

2 0 0

6

2 0 0

7


Debt payment per capita

Social service per capita



Figures show that the drop in debt

payments from 2006 to 2007 did nottranslate into a proportional increasein social spending.

N l t i Ed t i



Basic Education Spending per pupil (deflated)

0

500

1000

1500

2000

2500

3000

3500

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4


Neglect in g Edu cat ion

Source: NSCB Philippine Statistical Yearbook 2005

N l t i H l t h



Health per capita (deflated)

-

10

20

30

40

50

60

70

80

90

100

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7


Source: NSCB Philippine Statistical Yearbook 2005

Neg lect ing Hea l t h

Suffer the Future



Suffer the FutureDebt per capita vs. Health, Education per capita

1985 prices

-

500

1,000

1,500

2,000

2,500

1 9

8 3

1 9

8 4

1 9

8 5

1 9

8 6

1 9

8 7

1 9

8 8

1 9

8 9

1 9

9 0

1 9

9 1

1 9

9 2

1 9

9 3

1 9

9 4

1 9

9 5

1 9

9 6

1 9

9 7

1 9

9 8

1 9

9 9

2 0

0 0

2 0

0 1

2 0

0 2

2 0

0 3

2 0

0 4

2 0

0 5

2 0

0 6

2 0

0 7


Health per capita (deflated)

Education per capita (deflated)

Debt payment per capita (deflated)

Th B d f D b



Th e Bu r den o f Deb t

Nat i ona l Gove rn m en tDebt per Fi l i p ino (using

2007 NG Debt and NSCB projected2007 population)

P 4 2 ,8 1 9 .4 2

Debt Serv i cing per

m i n u t e (using data on Interest

and Principal payments on 2007)P 1 ,1 6 5 ,8 9 8 .0 2

Ex t er n a l Deb t a s % o fGDP (using NSCB 2007GDP data

and external debt data as of Sep2007 from BSP)

3 4 . 5 1 %

Th e Su f f e r in g Con t in u es



g

DBM Pr oposed Spend ing fo r 20 08( i n b i l l i on pesos )

Deb t Ser v ice 6 2 4 .0 9 Edu cat ion 1 8 1 .8 6

Interest Payments

295.75 Heal t h 2 2 .9 0

Principal Amortization

328.34Agr i cu l t u r e andAgrar ian Re fo r m

41 . 18

En v i r on m en t 1 0 .0 6

Mi l i t a ry 61 . 42

Note: Breakdown of totals may not sum up due to rounding of digits.

Distribution of Total Spending, per Administrationi t



in percentages

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Aquino (86-92) Ramos (93-98) Estrada (99-00) Arroyo (01-07)

InterestPayments

Net Lending

Gen PublicServices

Defense

SocialServices

EconomicServices



Ar r oy o , Deb t , an d t h e Fisca lCr is is

Th e 2 0 0 4 Fisca l Cr is is



In 2004, the Arroyo administration finallyadmitted and declared a fiscal crisis, after it

incurred huge amounts of deficits year afteryear. It survived the crisis and reduced the deficit

mainly through

Further increasing its borrowings up to 2006 Aggressive indirect taxation schemes like E-VAT Spending cuts Increasing non-tax revenues, mainly through

privatization Increase in GDP/GNP – translating to increase

also in other tax revenues – have to checkfigures for direct taxes

Beef in g u p Reven u es t o Su r v i v e



Beef in g - u p Reven u es t o Su r v i v e

Revenues vs. Debt Servicing - Arroyo(in billion pesos, nominal)

-

200

400

600

800

1,000

1,200

2001 2002 2003 2004 2005 2006 2007

Arroyo

Non-tax Revenues

Tax Revenues

Debt Servicing


Privatization Proceeds100.00



Privatization Proceedsin billion pesos

5.82

90.62

2.430.420.570.591.174.654.18

1.72

9.435.66

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Ar r oy o Reg im e - St i l l Bigg est



Bor r ow ings, Lar gest Deb t Paym en t s

Debt Service and Borrowings, in real (1985) prices,Annual Average(in billion pesos)

59.6

52.7

64.7

126.9

23.9

85.4

118.3

55.9

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Aquino (86-92) Ramos (93-98) Estrada (99-00) Arroyo (01-07)

Debt Service (real) Annual Average

Borrowings (real) Annual Average

Comparing Aquino's, Ramos', Estrada's and



Comparing Aquino s, Ramos , Estrada s andArroyo's Revenues, Expenditures and

Borrowings

-1,000,000.00

2,000,000.00

3,000,000.00

4,000,000.00

5,000,000.006,000,000.00

7,000,000.00


Administration

A m o u n t

i n B P h p

Revenues

Expenditures

Borrowings



Nat iona l Gove r n m en tCon t in gen t Liab i l i t i es

National Government Oustanding and



Contingent Debt

(in billion pesos, nominal)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1 9

9 0

1 9

9 1

1 9

9 2

1 9

9 3

1 9

9 4

1 9

9 5

1 9

9 6

1 9

9 7

1 9

9 8

1 9

9 9

2 0

0 0

2 0

0 1

2 0

0 2

2 0

0 3

2 0

0 4

2 0

0 5

2 0

0 6

2 0

0 7


Contingent Liabilities

Outstanding Debt

National Government Contingent Liabilities



g(in billion pesos, nominal)

-

100

200

300

400

500

600

700

800

900

1

9 9 0

1

9 9 1

1

9 9 2

1

9 9 3

1

9 9 4

1

9 9 5

1

9 9 6

1

9 9 7

1

9 9 8

1

9 9 9

2

0 0 0

2

0 0 1

2

0 0 2

2

0 0 3

2

0 0 4

2

0 0 5

2

0 0 6

2

0 0 7


ForeignDomestic

Con t ing en t Liab i l i t i es and t h ePr epaym ent o f NPC Debt s



Pr epaym ent o f NPC Deb t s

The Philippine Government guaranteed some ofNPC’ s debt to its lenders. Some of it s debts thusref lect in the Cont ingent Liabilit ies

The sharp decrease in contingent liabilit ies mayhave been because of the pre-payment of the debts

of National Power Corporation (NPC).

In December 2004, the Power Sector Assets and

Liabilities Management Corporation (PSALM), inaccordance with the Electric Power IndustryReform Act of 2001 (EPIRA), pre-paid up to US$1

billion of the National Power Corporation's (NPC)debt or about 14%of total NPC debt.



BRI EF HI STORY OF DEBTRESTRUCTURI NG / RESCHEDULI NG / DEBT “ RELI EF” fo r t h e PHI LI PPI NES

1 96 0 s – 7 0 ’s - the Philippines was unable to



ppservice a significant portion of its private debt.

Negotiations for debt service rescheduling withthe London Club resulted in new loans for thePhilippines as part of the debt reschedulingpackage.

1 9 8 3 - The Philippines defaulted on its foreignobligations in 1983 and negotiated for a

moratorium on debt service payments in 1984.

1 9 8 5 - Philippines underwent a debtrescheduling measure thru the Baker Plan

which involved increased bank lending for theimplementation of the adjustment programunder the IMF.

Sources : US Department of State, “1993 Country Reports on Economic Practice and Trade Reports”; www.rrojasdtatabank.org ; Training Package 9 - Commercial Debt Chapter IX.3.a: The London Club , The London Bank; World Bank Operat ions Evaluat ion Departm ent , 2001;

http://www.rrojasdtatabank.org/

http://www.rrojasdtatabank.org/



1 9 8 6 - There was a gradual shift towards

longer-term and more concessional sourcesof financing, away from short-term,commercial debts.

1 9 8 9 - The Br ady Plan initiated for thePhilippines, culminating in the signing of

the 1992 Securitization Deal. Loans were “converted” into Brady Bonds.

1 9 9 0 – World Bank financed the DebtManagement Program Loan to thePhilippines.



Mar ch 19 93 – Paris Club and IMFarrangements ended with thePhilippines generally in compliance

with the IMF targets.

1 9 9 4 - 1 9 9 7 – The Philippines startedits IMF Exit Program last 1994 andended in 1997.

1 9 9 6 – 1 9 9 7 - the Philippines



1 9 9 6 1 9 9 7 the Philippines

swapped $4.4 billion of Brady bondsfor uncollateralized long-term bonds asa form of debt reduction. Because the

swap was effected at a discount basedon secondary market prices, debtoutstanding commensurately reduced.

2 0 0 0 ’ s – Pre-payment (2006),

Privatization and Regressive Taxationwere implemented as policies.



Relev an t Nat i ona l Law s

and Po l i cies on t h e Deb t &B o r r o w i n g s

RELEVANT LAWS AMENDMENTS DESCRIPTION



FOREIGN BORROWINGS

ACT (R.A. 4860) datedSeptember 8, 1966

AS AMENDED

BY PRESIDENTIAL

DECREE NO.

1939

This law authorizes the

President to obtain foreignloans for economic

development as well as to

guarantee foreign loans

and/or bonds incurred by

government owned and

controlled corporations.

P.D. No. 1177, Section31 Automatic

Appropriations

(July 30, 1977)

Now incorporated in

Article VI. Section 24. of

the 1987 AdministrativeCode

A Presidential Decree thatprioritizes debt servicing

which assures creditors of

regular and updated debt

payments at all times.

Philippine Constitution This law gives authority to the



Section 20, Article VII

g

President to contract or

guarantee foreign loans onbehalf of the Republic of the

Philippines with the prior

concurrence of the Monetary

Board, and subject to such

limitations as may be provided

by law.

Philippine Constitution

Section 21, Article XII

Aside from ensuring that

Foreign loans can only be

incurred through monetary

authority, this Constitutional

provision also gives prime

importance on public access to

information on these loans.



BSP CIRCULAR NO. 1389

DATED 13 APRIL 1993, ASAMENDED (PART TWO,

CHAPTER I)

A Bangko

Sentral

ng

Pilipinas

circular which

states that Foreign

borrowings of the public

sector need prior BSP

approval except short term

Foreign Currency Deposit

Unit (FCDU) loans specified

under Section 24.4 ofCircular No. 1389.

The Philippine BOT AMMENDMENTS: This provision allows



Law (Republic Act

No. 7718), July 26,1993

“An Act amending

certain Sections of

Republic Act No. 6957,

entitled “An Act

Authorizing the

Financing,

Construction,

Operation and

Maintenance ofInfrastructure Projects

by the Private Sector,

and for other

Purposes”.

private sectors to finance,

construct, operate andmaintain priority projects

included in the

development programs of

all concerned

government

agencies including

government-owned and

controlled corporationsand local government units.

Official Development AMMENDMENT The ODA Act of 1996



Assistance (ODA) Act

of 1996

REPUBLIC ACT 8182 AS

AMENDED BYREPUBLIC ACT 8555,OFFICIALDEVELOPMENTASSISTANCE ACT OF

1996

AN ACT EXCLUDINGOFFICIAL DEVELOPMENTASSISTANCE FROM

THE FOREIGN DEBT LIMITIN ORDER TO FACILITATETHE ABSORPTION ANDOPTIMIZE THEUTILIZATION OF ODA

RESOURCES,AMENDING FOR THEPURPOSE PARAGRAPH 1,SECTION 2 OF REPUBLICACT NO. 4860, ASAMENDED

states that it will

finance only projectsthat promoteeconomic developmentand welfare ofdeveloping countriesand that it isconcessional in

character and whichcontains a grantelement of at least25 percent (calculated

at a rate of discount of10 per cent).”

Documents

Debt Situation