Debt statistics 2015
|Overall international debt burden (% of GDP)||19|
|Government payments on foreign debt (% of revenue)||10.8|
|Government foreign debt (% of GDP)||10|
|Private foreign debt (% of GDP)||10|
|IMF and World Bank debt cancellation ($ billions)||0|
|Country case studies||Yes|
Country case study
The Philippines gained independence from the United States at the end of the Second World War, having earlier been a colony of Spain. In 1965 President Marcos was elected. In 1972 Marcos declared martial law after he was constitutionally barred from seeking a third term of office. The Marcos dictatorship maintained itself in power through substantial outside assistance from the US and western countries, because he was on their side during the Cold War. One of the main forms of support was loans from governments and international institutions such as the World Bank.
During his rule, Marcos is thought to have stolen up to $10 billion. At the same time, between 1970 and 1980 government external debt increased from $600 million to over $6 billion, a rise from 10 to 20 per cent of GDP. In the early 1980s US interest rates increased and prices of export commodities fell. Annual debt payments doubled in a few years. In order to keep paying the debt and interest, more loans were taken out, increasing from $900 million in the late 1970s to over $2 billion by 1983.
The Philippine economy stagnated, then entered a huge recession, shrinking by more than 20 per cent in the mid-1980s; the debt hit 70 per cent of GDP by 1987.
Through the course of Marcos’s dictatorship, the IMF and World Bank lent the regime $5.5 billion, with a further $3.5 billion from foreign governments such as the United States. Over $9 billion was lent by the foreign private sector, such as banks. One notorious deal was US government backed loans for the Bataan Nuclear Power Plant, built by US company Westinghouse. Marcos, his cronies and Westinghouse all did well financially out of the plant. But it never produced any electricity and was built on an earthquake fault line and at the foot of a volcano. Hundreds of millions of dollars were spent on repaying the loans by the Filipino people, and the debt for the useless plant was finally paid off in 2007.
Popular opposition to the Marcos regime increased through the 1980s, and in 1986 he was ousted from power through the ‘Edsa Revolution’. Activists demanded that the Marcos era debts be declared illegitimate and cancelled. However, new President Aquino made a speech in the US Congress in September 1986 where she announced all debts would be honoured. A subsequent law was passed prioritising all debt payments over any other government spending.
In 1987, many of the activists involved in the overthrow of Marcos formed the Freedom from Debt Coalition, which exists to this day. Around 250 delegates attended its first Congress in 1988. The Freedom from Debt Coalition called for two principles to be adopted; that the people should know the details of where the debt comes from, being the ones who have to pay it; and that debt payments should be adjusted to ensure economic growth and cuts in poverty. The Freedom from Debt Coalition went on to be one of the founding organisations of Jubilee South.
However, high debt payments continued, averaging 17 per cent of export revenues in the 1980s and 1990s, and still 12 per cent in the 2000s. Since 1970 the Philippines government has been lent $110 billion, repaid $125 billion, but is still said today to owe $45 billion.
Since the late 1980s, the size of the Filipino economy has increased in per person terms by 40 per cent. Whilst the percentage of people living in poverty, as defined by the World Bank, has fallen slightly, the number of people living on less than $2 a day has increased from 33 million in 1988 to 38 million in 2009. In contrast, in the whole of East Asia the number of people living on les than $2 a day has almost halved in the same time, from 1,200 million to 640 million.
Today, the Philippines government on some measures continues to be one of the most indebted in the world. It currently spends almost 30 per cent of government revenue on debt payments each year, more than is spent on public health and education combined. But the East Asian country was considered too rich for the IMF and World Bank run scheme to cancel some debts. National income per person is currently £2,600.
Loans keep being given. Between 2005 and 2009 the UK government backed over £140 million of loans for the Philippine government to contract British company Mabey & Johnson to build bridges in the country. At the time it had been alleged that Mabey & Johnson had made corrupt payments in other countries, and in 2009 were found guilty of bribing officials in Angola, Bangladesh, Ghana, Madagascar, Mozambique and Jamaica.
The project became known as the infamous ‘bridges to nowhere’ scheme, with local campaigners documenting heavily reinforced steel bridges which led into the middle of fields, were only used by pedestrians or connected up mud tracks. Mabey & Johnson were charging substantially more than rivals and, despite allegations of excessive profit, corruption and overcharging, the UK government’s UK Export Finance continued to back the scheme.