CSOs: Debt for MDG swap can solve RP’s MDG financing gaps

IN order for the Philippines to finance the achievement of the Millennium Development Goals (MDGs), civil society organizations (CSOs) believe that pursuing the debt for MDG swap scheme can help the Philippines address financing gaps.

Under this scheme, the Philippines can be given a chance to reduce its debt and use the funds for MDG achievement. This scheme was among the proposed actions from the United Nations-sponsored Financing for Development Summit in 2002 which saw the most comprehensive scale of CSO participation in a UN conference.

In a presentation titled “Possibilities of Debt Reduction for MDG Financing: Philippines and Indonesia,” CSOs, Social Watch Philippines, Kaakbay, Liberal Party’s National Institute for Policy Studies and Code: RED (Reforms for Economic Development), said heavy debt burdens often reduce funds for social and economic services that are necessary for MDG achievement.

Earlier, research group Ibon Foundation Inc. said most of the increase in the 2011 budget was due to the P80.9-billion increase in interest payments on debt to P357.1 billion.

These are the kinds of payments that CSOs believe should be utilized for the MDGs.

In 2002, state-owned think-tank Philippine Institute for Development Studies (PIDS) stated that for 2007 to 2010, the financing gap for the MDGs was estimated between P350 billion to P447 billion every year.

PIDS senior fellow Dr. Rosario Manasan earlier said these financial requirements must also have increased, considering the global economic crisis and the twin typhoons Ondoy and Pepeng in 2009. She, however, could not yet provide new estimates.

“For poor and low-income countries, heavy debt burden reduces social financing; periods of financial crises, panics and deep recession, heavy debt burden contribute to economic collapse and increased poverty, and retard human development; foreign exchange needed for development is going to debt service which leads to lower economic growth or recessions and retardation of development and MDGs; and fiscal revenues are being channeled to debt service which could have gone to MDG financing.” The above, CSOs said, are the reasons why a debt for MDG swap will be good for the Philippines.

The CSO’s said the mode of debt to MDG swap could be done in several ways. Among these modes are the outright cancellation or providing large discounts for debts in exchange for MDG financing and other debt treatments or dent rechanneling like debt rescheduling, debt reduction, debt conversion for MDG financing.

The recommendation of the CSOs is to offer attractive MDG projects and programs where bilateral debts or grants can be rechanneled within or outside the bounds of the Paris Declaration on Aid Effectiveness.

The Paris Declaration on Aid Effectiveness is an international agreement for developing countries to exercise effective leadership over their development policies for more harmonized, transparent, and effective actions.

Further, the CSOs believe that there is a need to change the concept of debt sustainability from capacity to pay to whether or not financing the MDGs are hampered by debt servicing.

Under this debt sustainability concept, a country’s achievement of the MDG targets and its ability to counter financing gaps will be taken into consideration.

It will also take into consideration a country’s actual budget for social and economic services that are vital to meeting the MDGs.

“This new debt sustainability concept should [also] consider indicators that foreign exchange outflows to pay debt service impede the economic and social development of the country and retarding the progress to achieve the MDG targets,” the presentation stated.

The recommendations of the CSOs are all encapsulated in a book titled “Public Finance or Penance for the Poor: Financing for Development” published by Social Watch Philippines with the support of the United Nations Development Program and the National Economic and Development Authority.

The book will be launched today at the University of the Philippines National College of Public Adminsitration. The authors of the book are Jessica Reyes-Cantos, Joseph Anthony Lim, Clarence Pascual, Mario Jose Sereno, Eduardo Tadem, Filomeno Sta. Ana III, and Prof. Leonor Briones. –Cai U. Ordinario / Reporter, Businessmirror