Bianca V. Bansalan
Viha Marie Baylosis
Ronyn M. Lasco
Hannah Mayen C. Sevilla
External debt of the Philippine government.
• Republic of the Philippines external debt is the amount of money owed by
the Filipinos to foreign creditors such as Asian Development Bank (ADB) and
the World Bank.
• In 2010, the total outstanding foreign debt of the country is US$ 60 billion,
which accounts for 31.8% of the Gross Domestic Product (GDP) of that same
year. The external debt portfolio consists mostly of medium to long-term
loans, used to finance the economic activities and reforms of the government.
Beginning of Phil. High external debts…
• Ferdinand Marcos (Dec 1965 - Feb 1986)
▫ During the years 1966 to 1969, Marcos borrowed a great amount of
money to finance his domestic expansion and reforms. This
expansion in the government budget led to increases in the current
account deficit and crisis in the balance of payments.
• Corazon Aquino (Feb 1986 - Jun 1992)
▫ When Corazon Aquino won the February 1986 presidential elections,
the external debt increased to some US$ 28 billion. She aimed to
meet debt-service payments and reduce debt size in the long run.
• Fidel V. Ramos (Jun 1992 - Jun 1998)
▫ The 12th president of the Philippines, President Fidel Ramos was able
to uplift the economy of the country through focusing on “people
empowerment” and “global competitiveness.” During his time, the
Philippines was considered as one of the “Tiger Cub Economies” in Asia
with its continuous growth and prosperity.
• Joseph Ejercito Estrada (Jun 1998 - Jan 2001)
▫ The Estrada administration was not able to follow through on the
achievements of the previous administration. Plagued with rumors on
corrupt and inept actions of the government, the country lost some of the
trust of foreign entrepreneurs and investors, thus reducing the source of
finances of the administration. This had further caused the country to
borrow from banks and financing institutions in national and
international levels, which in turn caused the Philippines to be more in
Gloria Macapagal-Arroyo (Jan 2001 - June 2010)
• During Arroyo administration, foreign debt of the country had
reached its peak in 2003 with an outstanding of US$ 57.6
billion, which is more than the combined borrowings of the last
two governments. This has eventually led to a state of fiscal
crisis with huge amount of deficit, as admitted by President
Arroyo in 2004.
• a portion of the total debt of a country that is borrowed from
creditors outside the country. These creditors may include foreign
banks, private corporations or individuals. These loans are to be
paid in the currency in which the loan was made thus, the country
may export goods to the lending country.
• Type of Debt
▫ The external debt remained predominantly medium to long-term (MLT) in nature, with
these accounts representing 90.6 percent of the total external debt. MLT accounts are
those which are paid more than a year and is distributed over a longer period of time.
▫ The Bangko Sentral ng Pilipinas (BSP) is the financial institution that regulates and
approves the amount of external debt the Philippines. It also controls and makes sure that
there is enough money to be paid and there is sustainability in the country’s external debt.
• Institutional Creditors
▫ The World Bank is a financial institution that aids third-world countries in their
development by lending them money. Its main goal is to lessen poverty in the whole world.
• Country Creditors
▫ The Philippines does not only borrow from financial institutions but also to foreign
countries with high supply of money. Some of these countries are the United States of
America, Japan, United Kingdom, France, and Germany.
Risk of External debts to the Philippines
• The country might focus too much and allot a big part of its budget
to the payment of the debt and forget the other aspects of the
country that it has to work on.
• The reputation of a country is also at stake when external debt is
looked at and may discourage investments to enter into the
• High external debt also tends to precipitate crises - if, at some
point, investors lose faith in the Philippines' ability to service its
external debt or its ability to roll the debt over, they would be
expected to pull capital out of the country.
Motto Working for a World Free of Poverty
Type International organization
Legal status Treaty
Purpose/ focus: Crediting
Location: Washington, D.C., U.S.
Membership 188 countries (IBRD)
172 countries (IDA)
President Jim Yong Kim
Main organ Board of Directors
Parent organization World Bank Group
• The World Bank was created at Bretton Woods in 1944 to lend
to European countries to help them rebuild after World War II. It
was the world's first multilateral development bank, and was
funded through the sale of World Bonds. Its first loans were to
France and other European countries, but soon lent money to
Chile, Mexico and India to build power plants and railways. By
1975, the Bank also lent money to countries to help with family
planning, pollution control and environmentalism.
• The World Bank comprises two institutions: the International
Bank for Reconstruction and Development (IBRD) and
the International Development Association (IDA).
• Jim Yong Kim
▫ A naturalised American citizen before taking office. Physician and
anthropologist, co-founder of Partners in Health and 17th President
of Dartmouth College. Elected on 16 April 2012.
• The World Bank has one central purpose: to promote economic
and social progress in developing countries by helping to raise
productivity so that their people may live a better and fuller life.
• The World Bank focuses its policies around achieving eight Millennium
Development Goals by 2015. The World Bank claims that the goals
"provide [it] with targets and yardsticks for measuring results" and
working toward its ultimate goal of reducing global poverty and
growing developing nations (About Us - Our Work, 2012).The goals are
▫ 1) Eradicate extreme poverty and hunger
2) Achieve universal primary education
3) Promote gender equality and empower women
4) Reduce child mortality
5) Improve maternal health
6) Combat HIV/AIDS, malaria and other diseases
7) Ensure environmental sustainability
8) Develop a global partnership for development
• Henry Hazlitt argued that the World Bank along with the monetary system it was designed
within would promote world inflation and "a world in which international trade is State-
dominated" when they were being advocated. Stiglitz argued that the so-called free
market reform policies which the Bank advocates are often harmful to economic
development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or
in weak, uncompetitive economies.
• The other issue of the World Bank has been the way in which it is governed. While the World
Bank represents 188 countries, it is run by a small number of economically powerful
countries. These countries (which also provide most of the institution's funding) choose the
leadership and senior management of the World Bank, and so their interests dominate the
bank. Titus Alexander argues that the unequal voting power of western countries and the
World Bank's role in developing countries makes it similar to the South African
Development Bank under apartheid, and therefore a pillar of global apartheid.
• The United States Senate Committee on Foreign Relations reported the World Bank and
other international financial institutions for focusing too much “on issuing loans rather than
on achieving concrete development results within a finite period of time” and called on the
institution to “strengthen anti-corruption efforts.”
• October Rebellion was the collective name for the series
of protest events surrounding the fall 2007 meetings of the World
Bank andInternational Monetary Fund on October 19 –
20, 2007, in Washington, D.C., United States. The events were
organized by the October Coalition. According to the October
Coalition's call to action, the group demanded an end to all third world
debt using the financial institutions' own resources, the end to
structural adjustment policies believed to prioritize profit over the lives
of individuals, and an end to social and environmental issues caused by
oil and gas production, mining, and certain kinds of infrastructure
• World Bank Oslo 2002 Protests were organized by Oslo 2002, an umbrella organization
for about 50 participating organizations including labour unions, political
parties, environmental organizations, church organizations and ATTAC from Norway,
Sweden and Denmark. While each participant had its own reasons, here were the Oslo 2002
▫ "Our world is not for sale--stop the World Bank’s undemocratic market policies!"
▫ "Cancel Third World debt--release the choke hold!!"
▫ "Free trade pollutes!"
▫ "Yes to women and women’s rights--no to the World Bank!"
▫ "Stop the World Bank’s attack on labour rights!"
The network claimed that the World Bank is an undemocratic institution used by rich
nations to control poor countries. EinarBraathen and ReidunHeiene of ATTAC Norway and
the Oslo 2002 network also criticized the bank for believing too much in market-
Asian Development Bank (ADB)
• The Asian Development Bank (ADB) is a regional development
bank established on 22 August 1966 to facilitate economic development of
countries in Asia.The bank admits the members of the United Nations
Economic and Social Commission for Asia and the
Pacific (UNESCAP, formerly known as the United Nations Economic
Commission for Asia and the Far East) and non-regional developed
• From 31 members at its establishment, ADB now has 67 members - of which
48 are from within Asia and the Pacific and 19 outside. ADB was modeled
closely on the World Bank, and has a similar weighted voting system where
votes are distributed in proportion with member's capital subscriptions.
• Central to the ADB's advice is encouraging private companies to
invest in and construct power plants. They have argued that
involving the private sector better distributes economic risks
among those who can best absorb them, and that cash-starved
government gain benefits at little risk.
▫ The main purpose of the Asian Development Bank is to provide loans and
investment money to the countries of Asia as a way to assist in their
development. In particular the loans are granted to the poorer nations in the
region so that they can improve both their economic and social conditions. In
most cases the loans are treated as commercial loans and need to be paid back
with interest by the borrowing country. However in some cases the loans will
be concessional requiring that only part of the money be repaid. This will
depend on the borrowing country and what the money is being used for.
▫ ADB is committed to achieving the goals of the MillenniumDevelopment Goal’s
in partner countries through its Enhanced Poverty Reduction Strategy. ADB
supports investments relevant to achieving the MDGs and supports the
collection of statistics to monitor the progress made toward achieving the
ADB and Napocor
• The National Power Corp. (Napocor) is seeking another waiver
from its multilateral creditors, Asian Development Bank (ADB)
and the World Bank (WB) for failure to comply with loan
agreements, government documents showed.
International Monetary Fund (IMF)
• The IMF works to foster global growth and economic stability. It
provides policy advice and financing to members in economic
difficulties and also works with developing nations to help them
achieve macroeconomic stability and reduce poverty.
Philippines lend money to IMF
• The Philippines is lending the International Monetary Fund $1
billion to help stabilize the global economy amid the euro zone’s
debt crisis, the Bangko Sentral ng Pilipinas said on Wednesday.
• The $1 billion the Philippines lent the IMF forms part of the $456
billion crisis fund that the lender secured from its member-
nations to help insulate the global economy from any spillover
from the euro zone’s financial difficulties.”
Difference between IMF and World Bank
International Monetary Fund World Bank
• oversees the international monetary system
• promotes exchange stability and orderly
exchange relations among its member countries
• assists all members--both industrial and
developing countries--that find themselves in
temporary balance of payments difficulties by
providing short- to medium-term credits
• supplements the currency reserves of its
members through the allocation of SDRs (special
drawing rights); to date SDR 21.4 billion has
been issued to member countries in proportion
to their quotas
• draws its financial resources principally from the
quota subscriptions of its member countries
• has at its disposal fully paid-in quotas now
totaling SDR 145 billion (about $215 billion)
• has a staff of 2,300 drawn from 182 member
• seeks to promote the economic development of
the world's poorer countries
• assists developing countries through long-term
financing of development projects and programs
• provides to the poorest developing countries
whose per capita GNP is less than $865 a year
special financial assistance through the
International Development Association (IDA)
• encourages private enterprises in developing
countries through its affiliate, the International
Finance Corporation (IFC)
• acquires most of its financial resources by
borrowing on the international bond market
• has an authorized capital of $184 billion, of
which members pay in about 10 percent
• has a staff of 7,000 drawn from 180 member
Fiscal policy is one of those areas where everyone has an opinion but few people can
agree on any given idea. While reducing debt and stimulating the economy are the general
goals of most governments in developed economies, achieving those goals often involves
tactics that appear to be mutually exclusive and sometimes downright contradictory.
WAYS TO REDUCE GOVERNMENT EXTERNAL DEBTS:
Take for example the issuance of government debt. Governments often issue bonds to
generate revenue. This enables them to avoid raising taxes and provides money to stimulate
the economy, theoretically generating additional tax income from prosperous businesses and
Interest Rate Manipulation
• Maintaining low interest rates is another way governments seek to
stimulate the economy, generate tax revenue and, ultimately,
reduce the national debt. Low interest rates make it easy for
individuals and businesses to borrow money. In turn, the
borrowers spend that money on goods and services, which creates
jobs and tax revenues. Low interest rates have been employed by
the Unites States, the European Union, the United Kingdom and
other nations with some degree of success. That noted, interest
rates kept at or near zero for extended periods of time have not
proved to be a panacea for debt-ridden governments.
• Spending Cuts
-the act of reducing spending
• Raise Taxes
-tax increases are a common tactic. Despite the frequency of
the practice, most nations face large and growing debts. It is likely
that this is largely due to the failure to cut spending. When cash
flows increase and spending continues to rise, the increased
revenues make little difference to the overall debt level.