Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

3911

HOUSE BILL NOS S "_

Introduced by BAYAN MUNA Representative CARLOS ISAGANI T. ZARATE

AN ACT
REPEALING THE AUTOMATIC APPROPRIATION FOR DEBT SERVICE BY
AMENDING SECTION 31 OF PRESIDENTIAL DECREE NO. 1177 AND SECTION 26,
CHAPTER 4, BOOK VI OF EXECUTIVE ORDER NO. 292, OTHERWISE KNOWN AS
‘THE “ADMINISTRATIVE CODE OF 1987” WHICH REITERATES IN TOTO
SECTION 31 OF PRESIDENTIAL DECREE NO. 1177

EXPLANATORY NOTE

This bill amends Section 31 of Presidential Decree No. 117, otherwise known as the “Budget
Reform Deeree of 1977,” issued during the martial law period which provides for automatic
appropriation for public debt service. It likewise amends Section 26, Chapter 4, Book VI of
Executive Order No. 292, otherwise known as the “Administrative Code Of 1987,” which reiterates
in toto Section 31 of PD 1177.

‘The effective repeal of automatic appropriation for debt service remedies a long-standing defect in
the government’s budget policy — the indiscriminate payment of all public debts including
indefensible loans, regardless of the grave diversion of finances from basic services. It affirms and
asserts the obligation of the State under Article II, Section 9 of the 1987 Constitution to “promote a
just [social order]...through policies that provide adequate social services.”

‘The bill’s passage secks to pave the way for a more rational and humane budgetary process. It secks
to bring hundreds of billions of pesos annually paid for debt servicing within greater control of the
people, ‘The excesses of past administrations — including the Marcos dictatorship until the Aquino
adminsitration — will no longer hold the country hostage, and legitimate loans will cease to be a
Trojan horse for onerous and fraudulent debts. Government can begin to prioritize badly needed
social serv

Since 1986, cumulative debt servicing has been consuming almost a third of the annual national
government budget. Meanwhile, the country’s public schools, universities and colleges perennially
suffer from decrepit facilities, teachers, textbooks and classrooms shortages. Government hosp



aze being closed, public health services are a pittance, and vital medicines and treatments, especially
for the poor, have become inaccessible

“The need to repeal the law on automatic appropriation for debt servicing has become more urgent
as the public debt has become an albatross for the nation: “The country’s debt is bloated by revenue
Toeces irom trade liberalization, overly generous fiscal incentives for foreign investors, and the
guarantee of profits as government assumes contingent liabilities. Debt to GDP ratio is still high at
45-40% in 2014.! The government's continued dependence on borrowing means that the debt service
burden is getting heavier and heavie

“The large share of debt servicing in the national budget has exacerbated the government's worsening
neglect of social services since 1997. Education, health and social welfare budgets remain insufficient
wvhile a large share of the people’s taxes is allocated for ‘debt payments. For the year 2016, debt
Servicing amounted for P740.5B, of which P392.797B is for interest payment and P347.703B is for
payment for principal amortization of foreign ‘and domestic debts, The amount for debt servicing is
higher than the 2016 allotmentfor education which is ‘P508.5B and health with P135.2B’. Total debt
servicing accounted for 25% of total ‘expenditure’, of P25 for every P100 of the budget, with the
Filipino people pressed to contend with the remaining P75. ‘The amount for debt service could
comtruct about 600,000 classrooms and implement free irigaton for agriculture’

-The automatic appropriation for debt service at the expense of basic services is unjust. It pre-empts
the people’s prerogative by giving absolute and unquestioned priority to debe servicing and placing
xo much of the national budget outside normal budget processes: Tt has caused economic policy to
systematically favor narrow private creditor and corporate interests over the needs of the people. Tt
aren encourages gross fiscal irresponsibility by making loans depend less on their merits than on the
capacity of the government to squeeze the people for repayment funds.

But there’s only so much blood that can be drawn from stones. Appropriate legislation is vital co
correct this long-festering problem.

In the light ofthe foregoing, immediate approval of this bills earnestly sought.

Approved,

.

>

Rep. Wueass 4 TE
Bayan MunaPoart-ist

a
‘ Debt-to-GDP Ratio, hitpi//www.gov. 127/201 5-5 chic ct
aoe ore Vol LEB pp. 1248-1249, p/w dbm po phvp-contsaunloads AIGAAZOIGVOLUMES(201-
éamnencs.pil
Haass HESF Updated Tables, itis. ommesrsupDATEDI
+N Payments and NG Total Debt Service asa Percentage of Expenditure, paw gov. ph/2015/07/27/2018:

ea eyFormer Anakpawis Rep. Fernando Hicap, August 10.2015. sntpvswww.sunstar.com phimanita/losal-
Sn 5/08/1Oideh-servicing-budgt-trumps-eucation-2016-423820


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

3911

HOUSE BILL NO. ~~~"

Introduced by BAYAN MUNA Representative CARLOS ISAGANI T. ZARATE

AN ACT
REPEALING THE AUTOMATIC APPROPRIATION FOR DEBT SERVICE BY
AMENDING SECTION 31 OF PRESIDENTIAL DECREE NO. 1177 AND SECTION 26,
‘CHAPTER 4, BOOK VI OF EXECUTIVE ORDER NO. 292, OTHERWISE KNOWN AS
THE “ADMINISTRATIVE CODE OF 1987” WHICH REITERATES IN TOTO
SECTION 31 OF PRESIDENTIAL DECREE NO. 1177

Be it enacted by the Senate and Hons of Representative ofthe Philippines in Congress astmbled

SECTION 1. Section 31 of Presidential Decree No. 1177 of July 30, 1977 entitled "Revising “The
Budget Process In Order To Institutionalize The Budgetary Innovations OF The New Society” is
hereby amended to read as follows:

section 31. Automatic Appropriations. All expenditures for [(a)] personnel retirement
premiums, government service insprance, and other similar fixed SOCIAL SERVICE,
Expenditures {(b) principal and interest on public debr, (¢) national govemnmet:
guarantees of obligations which are drawn upon} are automaticaly appropriated:
provided, that no obligations shall be incurred or payments made from funds thus
eeromadcally appropriated except as issued in the form of regular budgetary allotments.”

SECTION 2. Section 26, Chapter 4, Book VI of Executive Order No. 292, otherwise known as the
“Administrative Code of 1987” which reiterates in toto Section 31 of Presidential Decree No. 1177
and similar laws, decrees, executive orders, administrative orders, or circulars are likewise hereby
amended.

SECTION 3. This Act shall take effect after fifteen (15) days following the completion of its:
publication in the Official Gazette or ina national newspaper of general circulation

Approwd,