Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. Ch

Introduced by
Bayan Muna Party-List Representatives FERDINAND R. GAITE,
CARLOS ISAGANI T. ZARATE and EUFEMIA C. CULLAMAT

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. 1177, otherwise known as the “Budget Reform
Decree 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 seeks to pave the way for a more rational and humane budgetary process. It seeks 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 Duterte administration
—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 services.

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 hospitals are 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 losses from
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 44% in the first quarter of
2019.! The government's continued dependence on borrowing means that the debt service burden is
getting heavier and heavier.

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
while a large share of the people’s taxes is allocated for debt payments. For the year 2018, debt servicing
amounted for P683B, of which P354B is for interest payment and P359B is for payment for principal
amortization of foreign and domestic debts’. The amount for debt servicing is higher than the 2018
allotment for education which is P552B and health with P106B°.

Despite the government’s huge debt servicing, the government is still borrowing heavily. According to
Thon Foundation, the total outstanding debt of the national government stood at Php7.9 trillion as of May
2019, implying a total increase of Php2 trillion since the start of the Duterte administration. In nominal
terms, this is equivalent to an average monthly increase in debt of Php56.2 billion, which is over two-and-
half times that of the Arroyo administration (Php21.2 billion) and nearly three times that of the previous
Aquino administration (Php19 billion)*

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 debt servicing and placing so much
of the national budget outside normal budget processes. It has caused economic policy to systematically
favor narrow private creditor and corporate interests over the needs of the people. It even 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 to correct
this long-festering problem.

In the light of the foregoing, immediate approval of this bill is earnestly sought.

Approved,

~FERD) GAITE
BAYAN MUNA Partylist

* hutps:/wwwwphils si 9/05/24/1920324/debt- is n
2.GAA 2018 Vol I-B pp. 1183-1184, hiips:/www.dbm.gov.ph/index.phy a / general jiations-act-fy-

2018
3 GAA 2018, hiips./wwy.dbm.gov.ph/index. php/budget-documents/2018/seneral-appropriations-act-fy-2018

* htips//www.ibon. miterm-change-for-the-worse/


net SRRAY 1s Loss

BAYAN MUNA Partylist

Oe eal
REP. EUFEMJA C. CULLAMAT
BAYAN MUNA Partylist


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS

First Regular Session

4087
HOUSE BILL NO.

Introduced by
Bayan Muna Party-List Representatives FERDINAND R. GAITE,
‘CARLOS ISAGANI T. ZARATE and EUFEMIA C. CULLAMAT

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 House of Representatives of the Philippines in Congress assembled:

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 insurance, and other similar fixed SOCIAL SERVICE
expenditures {(b) principal and interest on public debt, (c) national government guarantees of
obligations which are drawn upon,} are automatically appropriated: provided, that no
‘obligations shall be incurred or payments made from funds thus automatically 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 in a national newspaper of general circulation.

Approved,