In the early 1960s, the World Bank observed that the Philippines was the second fastest-growing economy in Asia, next only to Japan.  

And yet, the government struggled with a chronic balance of payments (BOP) crisis because the economy was import-dependent – on oil, machinery, industrial raw materials, and so on. This forced President Diosdado Macapagal to apply to the International Monetary Fund (IMF) for a $300-million stabilization loan. The IMF readily agreed but imposed policy conditionalities – devalue the peso and lift foreign exchange and import “controls.” These “controls” were the development instruments used by the post-war Philippine government in transforming an agrarian economy and engineering a double-digit annual industrial growth in the 1950s. 

In 1972, President Ferdinand Marcos Sr. launched a “revolution from the center” by declaring martial law with the promise of robust economic growth for all under an envisioned “new society.” To fulfill this grand ambition, the martial law government entered into agreements with the IMF, the World Bank, and other lenders to fund project and policy implementation. 

What followed in the succeeding years were a series of IMF stabilization loans and a surge in government’s “development” borrowings from lenders led by the Fund and the World Bank. The country’s external debt rose from around $2 billion in 1972 to $20 billion in 1980.  

When the national debt became unpayable in the early 1980s, the IMF-WB tandem came to the rescue by offering so-called  “structural adjustment loans” (SALs). The SALs formally enthroned trade/investment liberalization, deregulation of various sectors of the economy, and privatization of government corporations, assets, and services.  

From President Corazon Aquino to President Ferdinand Marcos Jr. today, the government pursues the IMF-World Bank track of opening up the economy, liberalizing imports, privatizing social services, and the like. Filling up fiscal gaps are heavily passed on to Filipinos through indirect, regressive taxes, again as per IMF advice. 

Overall, the economy has become debt-driven for around six decades. For any budgetary shortfall or any new infra budget, or to repay outstanding debts, the automatic or default response of the government is borrow.   

Enabling this knee-jerk response of incurring more debt is a Marcos Sr. legacy – Presidential Decree 1177 – that allows the executive branch to “automatically” make annual payments for interest and principal amortization on national debts no matter how big the total debt service is for a given year. From the 1980s to the present, the annual debt service ranges between one-fourth to even one-half of the national budget, a ratio enough to flatten a small business borrower everywhere. Worrisome? Not to the debt-addicted technocrats. Just keep borrowing and let future generations worry over the ever-growing mountain of national debt, which reached a whopping P13.6 trillion as of November 2022.

How are we faring after six decades of debt-driven economic governance?

First, IMF-World Bank prescriptions diligently followed by successive Philippine administrations have failed miserably, as seen in stagnant industrial and agricultural sectors from the ‘80s to the present. Second, our much-vaunted growth is consumer-driven owing to 10 million overseas Filipino workers, and benefits a tiny handful of super-rich individuals as shown by steeply rising income inequality reported by the World Bank.

The debt-driven and debt-dependent Philippine economy can only be described as grotesque, with policy-makers failing to heed the old adage of learning from the past so as not to repeat errors in the future. We have become more import-dependent with limited capacity to create good quality jobs for all. Were it not for the OFW remittances, the technocrats would not be able to brag at all about the country’s positive GDP growth. 

It is clearly time for the present generation of Filipinos to take a closer look at the debt situation through a public debt audit, and where the economy is headed. We cannot afford two or more decades of mal-development. – Rappler.com

Dr. Rene Ofreneo currently serves as the president of the Freedom from Debt Coalition (FDC).