President Marcos was last heard trying to minimize the significance of the country’s indebtedness. By doing so, he does our citizens as disservice.
Marcos described the debt as a meaningless number floating in the air. He made it sound like it was not worth thinking about. That is an irresponsible thing to say.
Before this year ends, and depending on how fast the peso crashes, our outstanding sovereign debt will hit P20 trillion. Our debt-to-GDP ratio has climbed up to 66 percent. About a third of our national budget goes to automatic debt service allocation – taking money away from economic investments and social services.
Our indebtedness is a major factor explaining the weakness of the peso – now among the worst performing currencies in the world. The weak peso pushes up the inflation rate.
Oil, for instance, is expensive because of geopolitical concerns. With our weak currency, we pay more pesos per barrel of this entirely imported product. The price of everything rises because of escalating energy costs.
To meet its need for revenues, government raises taxes on everyone. Our consumers are hit once more: having paid more for basic needs, we are now asked to pay more for taxes.
As the debt grows, the debt service becomes more burdensome. Funds that might go to better education and public health are redirected to pay interest on debt. Our children’s future is compromised by the debt load.
Our economic growth is hampered by poor infrastructure. But we can devote only so much to economic investments because we must pay down the debt. Our decrepit logistics framework raises the cost of producing and transporting goods our people need. Our food is expensive not only because our farms are inefficient but also because it costs more to move goods from the farms to the consumers.
The debt overhang prevents us from building the infrastructure our economy needs. Because government cannot fund economic investments, it relies on the private sector to build ports, airports and roads. The cost for building and maintaining them passes directly to the consumer. Our best roads are tollways.
Because government does not have the funds to invest in power generation, we rely on private investments. That makes our power more expensive than the rest of the region. Private investors pay higher financing costs than government would.
Because large amounts of taxpayer money goes to debt service, we have little left to fund research. We could not build the talent base that will enable our economy to be more competitive. We have no money to advance our scientific cadre that is essential to discovering new products we could trade.
Because we never have the funds, we could not modernize our agriculture. The result is a more expensive food price regime. Our people’s access to better nutrition is constrained. Malnutrition and stunting happens.
We could, for instance, dramatically bring down our power costs by investing in nuclear power. Only government can properly make such investments. But a heavily indebted government could not do this.
In most countries, urban mass transport is government-run. This enables commuters to get to work at least expense. But a debt-ridden government cannot devote funds to running mass transport. Therefore, we have a stressed-out working class.
To help pay down our debts, our government has been forced to sell off its prized jewels. Privatization is a necessity created by indebtedness.
Government should, ideally, subsidize communications. This helps build an informed citizenry. But our debt-strapped government cannot afford to fund a national broadband.
In a word, the debt punishes our people daily in multifold ways. It increases our people’s misery by the day. It penalizes our ability to build a modern economy that raises incomes and eliminates poverty.
In the best of all worlds, debt might have served our people if it was wisely invested to produce economic expansion. Over the past few decades, however, our debt always grew faster than our growth. At present debt levels, especially over the last four years, we can no longer hope to outrun the debt service.
We have a political order addicted to borrowing. The debt we incurred was not used productively. The debt we continue to incur funds dole-outs rather than productive economic activity.
And then we have lost so much to rampant corruption. Much of what was stolen was also borrowed, to be repaid by future generations. This is double jeopardy.
Our politics runs on indebtedness. Governments buy their legitimacy through subsidies. They win popularity through dole-outs. The nature of our politics puts us on the road to bankruptcy.
It is the President’s responsibility to educate our citizens on this matter. The economy is on its back and the currency is collapsing because we borrowed much and used the money wantonly.
It is the leader’s task to educate the people about the importance of fiscal discipline to shape a better society than what we now see. It for the President to enlighten our people of our current predicament: a large debt that is pushing the whole economy towards failure.
But instead of doing that, Marcos Jr. mystifies our fiscal situation. He instructs our people not to think much about the debt. He tells us the debt ‘is just a number.’
And then he gaslights our citizens by claiming that our national economy is better than all the rest.