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Source: abs-cbnnews.com

MANILA - Former national treasurer Leonor Briones warned against the government’s plan to sell foreign-denominated reconstruction bonds of up to P50 billion (US$1.1 billion) in 5- to 10-year maturities to fund rebuilding of communities devastated by typhoons.

In a press conference on Thursday, Briones stressed that presidential aspirants should monitor this proposal because the next administration will be carrying the burden of paying off these bonds, she said. President Arroyo’s term ends in June 2010.

“Kung 5-year bond, tamang tama sa next president. Kung 10-year bond, tamang-tama sa vice president (assuming the next vice president will seek the presidency in 2016). Dapat maging election issue ito,” Briones added.

Briones served under the administration of President Joseph Estrada. She is the lead convenor of the Social Watch Philippines, an NGO watchdog network monitoring poverty eradication, gender equality and other social indicators.

Why NDC?

Briones also questioned why the National Development Corporation (NDC) was picked to manage the funds and not the Department of Finance.

Under the proposal, NDC—an attached agency of the Department of Trade and Industry—will be the issuing entity backed up by a guarantee from the national government.

NDC will determine the source of funding, which projects to prioritize, and how to pay the bonds eventually.

“This has to be discussed thoroughly. It’s not easy to package it because it’s foreign denominated. We have to ask, what is the capability of the NDC in managing the funds,” Briones added.

“I am wary. Compared to direct loans, bonds have fixed terms. When it is due, it is due. We cannot postpone payment because there’s a calamity. How much will you pay for P50 billion bonds?,” Briones said in a Thursday press conference in Quezon City.

In a previous interview with ABS-CBN News Channel’s Business Nightly, Finance Secretary Margarito Teves explained that the government is coursing the proposed reconstruction bonds through NDC instead of issuing sovereign bonds since the national government just recently issued tapped the commercial market for a $1 billion bond.

However, the dollar-denominated bond was oversubscribed by more than 4 times, indicating a healthy appetite of bond investors for new issues from the emerging markets.

Nonetheless, the bond market can also be fickle. While global bond investor sentiments are positive towards the Philippines right now, it is more because investors have so much funds and are on the lookout for high-yielding debt issues. Investor appetite might swing against the Philippines when the tide turns.

“We have to asses the condition of the market. We don’t know what will happen months from today. We have to consider other options,” Teves told Business Nightly.

Realign 2009, 2010 budgets

Briones is also wary of increasing the budget deficit, which stood at P237.5 billion as of end-September. The full year 2009 deficit target is P250 billion.

Briones also reiterated calls to realign the 2009 and 2010 budgets instead of incurring more debt.

“It’s easy to say we should borrow. There is no quarrel, we need the money. But our position in Social Watch, before we decide to borrow, let’s check first if there are available sources of funding,” Briones said.

Briones said the President should exercise her power to transfer funds in the 2009 budget. Congress should also adjust the 2010 budget to make it responsive to the disasters.

“We can start with the unspent balances of the 2009 budget. Baka meron tayo makuha doon. Presumably mayroon pang natitirang unexpended funds for 2009. Kung saan pwedeng magamit, gamitin na. Meron na legal authority ang Presidente,” Briones said.

Social Watch research shows that President Arroyo transferred P178 billion of the 2008 budget to savings. Out of this amount, she only authorized the use of P38 billion. “We are saying there should be P140 billion that can be reviewed. We should do inventory,” she said. (Read: DBM is the source of Social Watch Data)

The President’s authority to transfer funds is a quicker way to fund reconstruction, Briones said. The P50-billion reconstruction bonds and P12 billion calamity fund earlier approved by Congress will take time.

“Kung anong unspent allocations sa 2009 budget ay dapat ire-allocate. Walang attention sa agricuture. Bahala na kung anong sakuna, makakain lang tayo. At ang producers ng food, makakapag-produce ng ipapakain,” she said.