Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3460

Introduced by BAYAN MUNA
Reps. NERI J. COLMENARES and 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. 1177, otherwise known as the “Budget
Reform Decree of 197,” 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 and more recently,
the Arroyo regime ~ 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 urgeat
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, Outstanding public debt was 41
percent of gross domestic product (GDP) in 1996, soared to around 80 percent in 2002, and is
beginning to increase again with 51.4% in 2012. The government's increasing 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.

‘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 ro
correct this long-festering problem,

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

Rep. C. sBVeFiea0e
Bayan Muna Parfy-lise C



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

3460

HOUSE BILL NO:

Introduced by BAYAN MUNA
Reps. NERI J. COLMENARES and 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 Flouse 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 SERVIC

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,