Below is an excerpt of the article titled Looted by the Bankrupt IMF System, the Philippines Opens to LaRouche by Mr. Mike Billington, a U.S. representative of statesman and physical economist Lyndon LaRouche, on the issue of the Philippine economic crisis.

The Debt Crisis

Table 1 shows how “Bankers’ Arithmetic” has looted the Philippines, especially since the so-called “Asian currency crisis” of 1997-98, when global speculators undermined the currency values of nations across Asia. Since that time, there have been essentially zero Western financial flows into the Philippines, except to refinance debt, at ever higher interest rates. Thus, as shown, the Philippines owed $46 billion in 1998, paid almost $47 billion in debt service between 1998 and 2004, and yet, despite no net real foreign investment, ended up owing nearly $55 billion. That is, $46-$47=$55; that’s Bankers’ Arithmetic!

On top of that, the debt itself has essentially doubled, in terms of the national currency, because of the devaluation of the peso by more than half, from 26.4 pesos to the dollar in 1997, to 56.4 in 2004 (the peso was 4 to the dollar in 1971!). In other words, the $46 billion in external debt owed in 1998 cost twice as much to repay today, in terms of the local currency, the peso, because the currency was reduced in value by half against the dollar. The peso valuation of that debt service is a more accurate measure of the actual labor power and national product which must be expended by the Philippine economy to meet that debt service.

Thus, if we take into consideration the impact of this speculative, forced devaluation of the peso, and calculate the peso equivalent of each year’s debt service payments in dollars, and then translate that peso value back into dollars at the 1997 exchange rate, we get a true measure of how much was extracted from the Philippine economy to pay the debt service. As shown in Table 1, the actual worth of the debt payments between 1998 and 2004 were about $89 billion, nearly twice the amount that the nation was given credit for. This makes the Bankers’ Arithmetic even more absurd: $46-$89=$55.

The government of President Gloria Macapagal Arroyo has done everything demanded of it by the IMF and the international financial institutions, and yet, as in the case of Argentina in the 1990s, the obedience has only led to poverty and bankruptcy. When the IMF and the World Bank demanded an increase of the regressive Value-Added Tax (VAT) from the already excruciatingly high 10% to 12%, and other new tax increases-all to be applied to debt service-the Arroyo government complied. Although several of the tax plans were rejected by the Congress, the VAT was recently rammed through over the opposition. Senate opposition leader Sen. Aquilino Pimentel warned Arroyo that the new tax would only “add to her woes, rather than bail her out of her predicament, for the simple reason that it would cause more hardships for our people.” The Minority Leader in the House of Representatives, Rep. Francis Escudero, said that the VAT, and the failure to act on the spreading poverty, were the central causes of the collapse of Arroyo’s popular support rating to 38%.

Despite various accounting schemes aimed at hiding the fact, it is estimated by several sources that two-thirds or more of the nation’s national revenue is being eaten up by debt service. A group opposing Arroyo led by three bishops, reported in May that 88% of tax revenues in 2003 went to debt service. With a sovereign credit rating at “junk” status, that is, below investment grade, the government must borrow at exorbitant rates on the international markets, further aggravating the crisis. At least $4 billion in new borrowing is planned for this year, all for debt service.

Read Mr. Billington's full report

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