Ferdinand Marcos Dec 1965 – Feb 1986

During 1966–1969, then president 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 (BOP). According to the Political Economy of Growth and Impoverishment in the Marcos Era, the Philippines' foreign debt rose from $360 million in 1962 to $26.2 billion by the end of 1985. [18] Hence, just over a third of today's $77 billion external debt was contributed by the 20-year rule of the Marcos government. During the early 1970s, the government aimed at reviving growth and establishing an economic stabilization plan as well as a standby credit arrangement with the International Monetary Fund (IMF).[19][20]

Under Republic Act 6142 of 1970, all external borrowing by the public and the private sector, with the exception of commercial bank sector, must be approved by the Monetary Board. The Management of External Debts and Investment Accounts Department (MEDIAD) within the BSP screened application for all external borrowings and maintained statistics on the country's external debt; this then was a limitation on debt service and on total external indebtedness. [21] The Foreign Currency Deposit System (FCDS), on the other hand, was in charge of permitting the external borrowing of banking sector—both domestic and foreign owned.

When Ferdinand Marcos became president in 1965, he continued Macapagal's economic liberalization policies, in turn causing debt to rise from US$277.7 million to US$840.2 million by the end of his term. On September 21, 1972, Marcos declared martial law, and in the next five years real GNP grew at an average of 7% per year. The next few years were also characterized by strong economic performance with the rise of exports and booming of investment, alongside the rise of capital flight and crony capitalism. The end of the 1970s was of high levels of foreign debt and external debt from the public sector. With the second oil price shock during the 1980s, interest rates rose and the government implemented countercyclical policy to increase public investment to maintain domestic incomes.[17]

Under Marcos, the Philippines saw its external debt balloon from US$360 million in 1962 to US$26.2 billion in 1986.[22][23] Much of this debt was for the government to finance economic development projects, which had to rely on borrowing from international lenders—such as theIMF—thus, the characterization of Marcos's administration as being "debt-driven". A prime example of a project to be funded through loans is the Bataan Nuclear power plant, which until this day has not been used.

By 1983, the Philippines had racked up a debt of US$24.4 billion and was unable to meet its payment obligations to the IMF and World Bank. The Philippines had subsequently had to agree to IMF and World Bank conditions to be granted another loan, which had led to the extreme [clarification

needed] devaluation of the Philippine peso.[24]

In 1982, the Philippines turned to the IMF once again due to BOP difficulties and increase in outstanding oil import credit (85%). During 1983, the debt-to-GDP ratio grew to 56% (compared to 35% during 1980) as well as the debt service ratio with 38% (versus 21% during 1980). [17] The government also called for emergency loans from the World Bank and transaction commercial banks. By December 1984, the country chose to abide by the IMF conditions (such as those on the peso, etc.) to receive additional funds. BOP targets were met in 1985 as the current account turned positive.[25]

Corazon Aquino (February 1986 – June 1992)[edit]See also: Corazon Aquino

Corazon "Cory" Aquino started her administration with a total debt of US$60.2 billion. Domestic debt was US$32.06 billion, while external debt totaled around US$28.2 billion. [26]The external debt problem was inherited from the Marcos regime. Aquino had the choice to repudiate the debts

acquired by the Marcos regime due to their fraudulent nature. The NEDA secretary believed that, in order to restore growth, the country should not repay the debt. Creditors did not give much consideration to the country's situation and initially refused any renegotiation. On the other hand, Jaime Ongpin, the finance secretary, and José B. Fernández, Jr., Bangko Sentral ng Pilipinas governor, together with World Bank representatives and various countries, were against Philippines repudiating its debt. The consequence of not honoring the debt, according to them, was loss of financial aid/support from foreign countries which the Philippines needed to bring back the economy. Jaime Ongpin also threatened to resign from his position if Cory decided for repudiation. In the end, Cory decided to honor the debt.[27] Later, USA designed a "Marshall plan" to help the country, an initiative that would ease Congress constraints on foreign aid programs and allow the private sector to extend more generous assistance; this proposal would expand private sector investment, enhance trade opportunities, and seek solutions for Philippines' external debt. [28] Furthermore, P4 billion of foreign debt (inclusive of interest) was paid off in the span of 6 years. To finance this, however, the country borrowed a total of P9 billion pesos, bringing the total external debt from $28.2 billion to $33.2 billion for the duration of the Aquino administration.[29]

The National Economic and Development Authority (NEDA) recommended a two-year moratorium on debt servicing as well repudiation on "fraudulent" loans. Business-oriented groups and cabinet member objected to this and ultimately, Aquino and the BSP resisted moratorium, opting to maintain a cooperative approach with its creditors.[25][30]

Through the IMF and commercial banks agreements, the Philippines was allowed to enter the Brady Plan, a "3-pronged program" which allowed the government to use funds to repurchase $1.31 billion at a 50% discount, to reschedule of its debt due (from 1990 to 1994) and for 80 banks to subscribe to $700 million worth of new loans.[25] A multinational initiative (1989–1991) called the Philippine Assistance Plan (or Multi Aid Initiative) agreed to provide a total of $6.7 billion assistance to the country.[30]

Ultimately, the Aquino administration negotiated with various creditor groups to lower interest rates, reschedule the country's debt, and reduce total debt size itself. [25] "The Aquino administration appeared to be unable to work with the Congress to enact an economic package to overcome the country's economic difficulties."[30] Moreover, although debt service payments only underwent slight changes (with BoP pressures still existent), overall growth caused the debt-to-GDP ratio to fall as well as the debt service-to-exports ratio.[25]

Fidel V. Ramos (June 1992 – June 1998)[edit]See also: Fidel V. Ramos

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." [31] During his time, the Philippines was considered as one of the "Tiger Cub Economies" in Asia with its continuous growth and prosperity. An example of the prosperity and growth that took place during the Ramos administration was the decrease in inflation rate, dropping from 20% to 10% even reaching as low as around 5%.[32]

Fidel V. Ramos's administration began with a total debt of $77.6 billion. 57.2% of which was domestic debt ($44.4 billion) while 42.8% was from foreign debt ($33.2 billion). [26] In the start of Ramos regime, he envisioned the Philippines to be a part of Asia's tiger economies. True to his word, the Philippines experienced economic growth. In 1996, the GDP grew at a rate of 7.2%. Inflation was also reduced from 9.7% (Corazon Aquino's regime) to 7.3%. [33] However, in the 1997 Asian currency crisis, the Philippines' economy took a huge blow. This may have come from the neglect of the agriculture and manufacturing industry. The peso depreciated from (1992) P27 to (1998) P41 to the dollar.[citation needed]

Ramos tried to control debt through debt restructuring and fiscal management. Ramos claims to have brought down the debt service ratio from 40% of export earning to around 20%. The debt

service ratio was reduced in his regime as well. Reduction in debt servicing, however, partially caused the economy's decline since funds were not used for the country's development/growth. [33]

Under his administration, the Republic Act 7653, more commonly known as the New Central Bank Act, was enacted on June 14, 1993. It took effect on July 3 of the same year. [34]This act serves as the governing body of the Bangko Sentral ng Pilipinas (BSP) and its responsibilities, governance, and operations. President Ramos had also boosted foreign trade and investments that increased capital flow into the country. With the reestablishment of the access to debt market, issuance of government bonds in foreign currencies was able to finance the recovery of the country, [35] until the Asian financial crisis of 1997.

In the external sector, the volatility of peso-dollar exchange rates had caused the widening of debt spreads.[36] However, through reforms on debt service payments and reasonable fiscal policy, this accumulated external debt was reduced to more controllable levels. Foreign exchange control was also implemented by reducing the supply of foreign exchange, while increasing the demand. [37]

Joseph Ejercito Estrada (June 1998 – Jan 2001)[edit]See also: Joseph Estrada

The Estrada administration was plagued with political and economic problems. Domestically, the fight against the MILF in Mindanao and questionable public governance reduced the trust of foreign entrepreneurs and investors. Internationally, the country was greatly affected by the world oil price hike and the tightened monetary policy of the United States Federal Reserve Board.[38]

Under the regime of Estrada, the Philippines has accumulated an debt amounting to P2.1 trillion in 1999. Domestic debt amounted to P 986.7 billion while foreign debt at US$52.2 billion. Even though the Philippines is at a disadvantage, the GDP growth rate was 3.2 percent from a −0.5 percent low in 1998. In addition, domestic investment started to increase from 18.8% of GDP in 1999 to 21.1% of GDP in 2000. Faced with a high foreign debt even just after he assumed his office, President Estrada in his first State of the Nation Address (SONA) said that contractionary policies will be employed by cutting back on government expenditures with the help of a budget framework. [39] At the end of 2000, total external debt had increased from year 1999 US$51.157 billion to US$51.358 billion. This rise was mainly due to the overspending of the National Government which resulted in a Php 136.1 deficit of cash operations. Also, the weakening of the Peso against the US Dollars (average of Php 44.19/US$1; record average low of Php 51.68/US$1 on October 31, 2000) resulted from the rise of US interest rates and greatly affected the borrowing of both the private and public sectors.[38]

A factor that hindered the improvement of Philippines' debt position is that the Estrada administration is the tension between the government and the Moro Islamic Liberation Front (MILF). Even though the Ramos administration had put effort to instill peace in Mindanao through agreement, they were not able to agree with the Estrada administration. Thus, this resulted to various terrorist attacks with the Philippine military and the civilians still. Some of those attacks are 277 violations committed, kidnapping a foreign priest, namely Father Luciano Benedetti, the occupying and setting on fire of the municipal hall of Talayan, Maguindanao; and the takeover of the Narciso Ramos Highway. [40] By doing so, they inflicted severe damage on the country's image abroad, and scared the much-needed foreign investments away. Because of this, on March 21, 2000, President Joseph Ejercito Estrada declared an "all-out-war" against the MILF. After months of conflict, on July 10 of the same year, the President went to Minadanao and raised the Philippine flag symbolizing victory. After the war the President said, "... will speed up government efforts to bring genuine and lasting peace and development in Mindanao". In the middle of July the president ordered the military to arrest top MILF leaders.

Unfortunately, to makes matters worse, the Estrada administration was criticized for incompetence and corruption. Estrada was accused of illegal gambling through the Juetenggate operation. Estrada was able to receive Php400 million as payoff from illegal gambling profits. This further destroys the

image of the current administration and lost the trust of the Philippine public. Foreign investors were now discouraged to invest in the Philippines. Also, in the second year of his administration, when Estrada was accused of influencing an investigation in the stock market manipulation, foreign investments further declined. With the Asian Financial Crisis and climatic disturbances, the performance of the Philippine economy just got only worse.Toward the end of Estrada's administration, the fiscal deficit had doubled to more than P100 billion from a low of P49 billion in 1998. In January 2001, Estrada was finally removed from office by a second peaceful "People Power" revolution led by the Filipino youth, NGOs, and the business sector. By the near end of his term, the total external debt has increased from year 1999 US$51.157 billion to US$51.358 billion. President Estrada was the first Philippine president to be impeached by Congress, and his vice-president, Gloria Macapagal-Arroyo, became the fourteenth President of the Republic.

Gloria Macapagal-Arroyo (Jan 2001 – June 2010)[edit]See also: Gloria Macapagal-Arroyo

Under the Arroyo administration, total outstanding debt only increased by an average of 0.47% per year. This is relatively low compared to other administrations due to good tax reform programs and high growth levels the country sustained during this administration. The country was able to reduce its total outstanding debt in 6 out of the 10 years. However, during her last year, total debt increased by 9.09%. During Arroyo's administration, total debt from the Philippine Charity Sweepstakes Office (PSCO) increased by around P4 billion. Arroyo allegedly broke the rule regarding the mandated policy of the PSCO for its expenses. Some of these debts were unaccounted for and thus was alleged to be the kickbacks of top officials. [41] It was also mentioned in an article that people were worse off during the end of the Arroyo administration than when she first sat as president. Unemployment increased, household real income shrank, poverty rose, many were forced to work outside the country.[42]

The foreign debt of the country reached its peak in 2003 with an outstanding US$57.6 billion, which is more than the combined borrowings of the last two governments.[43]According to the Freedom from Debt Coalition (FDC) In a span of 14 years, the Aquino, Ramos, and Estrada administrations contracted a total of Php1.51 trillion in debts, Php2.03 trillion less than what Arroyo has borrowed in her first six years in office. Under Arroyo, the FDC estimates that based on 2007 interest and principal payments, taxpayers carry a debt servicing burden of Php1.2 million every minute. Today, the FDC adds, every Filipino man, woman, and child owes creditors Php42,819.42. [44] This eventually led to a state of fiscal crisis due to the huge amount of the deficit,[43] as admitted by President Arroyo in 2004. As a response to this crisis, the option of an automatic appropriation policy that would allocate funds for debt service payments was questioned.[45]

Appropriation policy means that a portion of government budget for social services is cut to accommodate the payment of the external debt. From 39% in 2001 to 68% in 2004 of the national budget was allotted to interest and principal payments of debt. [46] The downside however of this policy is that it has greatly compromised the education, health and infrastructure of the country.

The government implemented new tax measures to increase the government budget, thus lessening the budget deficit. This included increased excise and corporate taxes, and the most controversial being the increase in value-added tax.[46]

According to former finance secretary Margarito Teves, what the Aquino administration calls the Arroyo administration as "lost decade" is not consistent with what data shows. During Arroyo's administration the Department of Finance had initiated several positive reforms that are benefited and still benefiting the country. The low rise in debt during the Arroyo administration also resulted in credit outlook upgrades from negative to stable, and then positive shortly after her term. This resiliency of external debt to shocks was credited to Arroyo's strong focus on tax reforms. [47] In another news article, according to House Minority Leader Danilo Suarez, the Philippine's capacity to lend $1 billion to the International Monetary Fund in 2012 should not be credited to Aquino's

administration, but rather to Arroyo's administration. This is due to the unprecedented growth levels the country had during Arroyo's administration.[48]

Following the fiscal crisis, the external sector policy for 2005–2006 of the Bangko Sentral ng Pilipinas was focused on the following: (a) to maintain appropriate levels of reserve deposits to ensure liquidity of the economy, (b) to retain market-determined exchange rate, with limited intervention during extreme cases, and (c) control foreign loans, particularly from the public sector.[49] Moreover, less borrowings, improved pre-payment schemes, lower foreign exchange rate and increased government revenue[43] led to a continuous decline of external debt until the last year of the Arroyo administration, with an outstanding external debt of US$64.738 billion in 2009.[50]

Benigno "Noynoy" Aquino III (Jun 2010 – Jun 2016)[edit]See also: Benigno Aquino III

During the Aquino administration, debt service and the public debt stock have continued to rise. It paid Php634 billion in debt service between July 2010 and April 2011 which is Php8 billion more than in the equivalent previous period under the previous administration. These payments over its first ten months also already exceed payments for the whole year of 2007, 2008 and 2009 respectively (and of the first two years combined of the previous administration). Yet the national government debt stock has continued to rise from Php4,582 billion in end-June 2010 to Php4,706 billion in March 2011.[51]

However, according to the Bangko Sentral ng Pilipinas, the Philippines became a creditor nation in 2010 when it joined the International Monetary Fund (IMF) Financial Transactions Plan (FTP) through which emerging market economies took part in international cooperation efforts to lessen the impact of the euro debt crisis on the rest of the global economy. Among the gains the Philippines got from joining the FTP was access to the New Arrangements to Borrow (NAB) facility, which the IMF established to help its members cope with serious international financial crises.[52]

The government reported 4.9% growth in real gross domestic product (GDP) in the first quarter of 2011 which was markedly slower than the 8.4% rate in the first quarter of 2010. Consecutive quarters are not strictly comparable but it can still be noted that the first three quarters of the Aquino administration has seen progressively slower growth year-on-year – from 8.9% in the second quarter of 2010, 7.3% in the third quarter, and 6.1% in the fourth quarter, followed by the 4.9% in the first quarter of this year.[51]

In addition to this, at the start of 2011 – and for the first time in the country's independent history – gross international reserves eclipsed external debt. Foreign reserves increased by 20.5% last year to $75 billion, up from $63 billion at the end of 2010. The Philippines' debt-to-GDP (gross domestic product) ratio is among the lowest in Asia at under 50%.[53]

By June 2013, it was announced by BSP Governor Amando M. Tetangco, Jr that the country's outstanding external debt registered by the BSP has declined by US$1.0 billion (or 1.8%) to US$58.0 billion from US$59.0 billion in March. According to him, this was largely a result of net loan repayments, mostly by the public sector, as well as negative foreign exchange revaluation adjustments as the US dollar strengthened, particularly against the Japanese Yen. This decrease supported the yearly trend with debt stock reflecting a reduction of US$3.2 billion (or 5.3%) from US$61.2 billion in June 2012.

The trend observed for the external debt-GDP-ratio was also the same for the said year, with the ratio down to 21.8% in the second quarter from 22.8% in March and 26.1% in June 2012.[54] Generally, the country's economy between 2012 and 2013 grew at an average rate of 7.0%.

Moreover, the country sustained its growth momentum in 2014 at a rate of 6.1%, as what the national government targeted to be 6.0–7.0% growth rate for 2014. [55] By the end of March 2014, it was reported that the country's outstanding external debt registered by BSP stood at US$58.3 billion. The debt-GDP-ratio for this year, from 22.8% in 2013, declined to 21.5%. [54]

During the first nine months of 2014, the country's BOP position recorded a US$3.4 billion deficit, a reversal from the US$3.8 billion surplus recorded in 2013. According to BSP, the deficit was attributed to the significant increase in net outflows in the financial account brought about by large net outflows in portfolio investments and in other investments.

Positive developments in the US economy and anticipations of interest rate adjustments by the US Fed have led to capital outflows in emerging markets like the Philippines. Meanwhile, the current account remained in surplus at US$6.8 billion supported by strong remittance flows and receipts from the BPO industries and the export sector. As of December 2014, the country's gross international reserves (GIR) stood at US$79.8 billion.[56]

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. announced that the outstanding Philippine external debt stood at US$75.3 billion at end-March 2015, down by US$2.4 billion (or 3.0 percent) from the US$77.7 billion level at end-2014. This decline was due to the net repayments (US$2.0 billion) mainly by banks.[57] Other factors that influenced the decline of the debt stock is from the negative foreign exchange (FX) revaluation (US$220 million) arising from the strengthening of the US Dollar against other currencies, and an increase in residents' investments in Philippine debt papers (US$100 million).Governor Tetangco said, "Key external debt indicators were observed to have remained at very prudent levels in the first quarter of 2015." Gross international reserves (GIR) of US$80.5 billion as of end-March 2015 represented 6.1 times cover for short-term (ST) debt under the original maturity concept compared to 4.9 times and 4.7 times as of end-December and March 2014.The Philippine's external debt is mostly consist of medium- to long-term (MLT) accounts which represented 82.6 percent of total.[58]

This implies that FX requirements for debt payments are well spread out and, thus, more manageable.The weighted average maturity for all MLT accounts stood at 17.0 years, with public sector borrowings having a longer average tenor of 22.2 years compared to 8.6 years for the private sector. ST external debt comprised the 17.4 percent balance of the debt stock, consisting largely of bank borrowings, intercompany accounts of foreign bank branches, trade credits, and deposits of non-residents.Public sector external debt stood at US$39.1 billion (or 52.0 percent of total debt stock), slightly lower than the US$39.3 billion level (50.7 percent) as of end-2014 due mainly to negative FX revaluation adjustments (US$209 million) as the US Dollar strengthened against most currencies.Private sector debt likewise declined to US$36.2 billion from US$38.3 billion a quarter ago due largely to the net repayments of bank liabilities (US$2.9 billion). [59]

Foreign holders of Philippine bonds and notes continued to account for the largest share (33.5 percent) of total external debt, followed by official sources (multilateral and bilateral creditors – 30.4 percent), foreign banks and other financial institutions (28.9 percent), and foreign suppliers/exporters (7.2 percent).The country's debt stock remained largely denominated in US Dollar (64.6 percent), and Japanese Yen (12.7 percent). US dollar-denominated multi-currency loans from the World Bank and Asian Development Bank comprised 10.4 percent of total, while the remaining 12.3 percent pertained to 17 other currencies.[60]

Joseph Ejercito Estrada (June 1998 – Jan 2001)

The Estrada administration was plagued with political and economic problems. Domestically, the fight against the MILF in Mindanao and questionable public governance reduced the trust of foreign entrepreneurs and investors. Internationally, the country was greatly affected by the world oil price hike and the tightened monetary policy of the United States Federal Reserve Board.[38]

Under the regime of Estrada, the Philippines has accumulated an debt amounting to P2.1 trillion in 1999. Domestic debt amounted to P 986.7 billion while foreign debt at US$52.2 billion. Even though the Philippines is at a disadvantage, the GDP growth rate was 3.2 percent from a −0.5 percent low in 1998. In addition, domestic investment started to increase from 18.8% of GDP in 1999 to 21.1% of GDP in 2000. Faced with a high foreign debt even just after he assumed his office, President Estrada in his first State of the Nation Address (SONA) said that contractionary policies will be employed by cutting back on government expenditures with the help of a budget framework. [39] At the end of 2000, total external debt had increased from year 1999 US$51.157 billion to US$51.358 billion. This rise was mainly due to the overspending of the National Government which resulted in a Php 136.1 deficit of cash operations. Also, the weakening of the Peso against the US Dollars (average of Php 44.19/US$1; record average low of Php 51.68/US$1 on October 31, 2000) resulted from the rise of US interest rates and greatly affected the borrowing of both the private and public sectors.[38]

A factor that hindered the improvement of Philippines' debt position is that the Estrada administration is the tension between the government and the Moro Islamic Liberation Front (MILF). Even though the Ramos administration had put effort to instill peace in Mindanao through agreement, they were not able to agree with the Estrada administration. Thus, this resulted to various terrorist attacks with the Philippine military and the civilians still. Some of those attacks are 277 violations committed, kidnapping a foreign priest, namely Father Luciano Benedetti, the occupying and setting on fire of the municipal hall of Talayan, Maguindanao; and the takeover of the Narciso Ramos Highway. [40] By doing so, they inflicted severe damage on the country's image abroad, and scared the much-needed foreign investments away. Because of this, on March 21, 2000, President Joseph Ejercito Estrada declared an "all-out-war" against the MILF. After months of conflict, on July 10 of the same year, the President went to Minadanao and raised the Philippine flag symbolizing victory. After the war the President said, "... will speed up government efforts to bring genuine and lasting peace and development in Mindanao". In the middle of July the president ordered the military to arrest top MILF leaders.

Unfortunately, to makes matters worse, the Estrada administration was criticized for incompetence and corruption. Estrada was accused of illegal gambling through the Juetenggate operation. Estrada was able to receive Php400 million as payoff from illegal gambling profits. This further destroys the image of the current administration and lost the trust of the Philippine public. Foreign investors were now discouraged to invest in the Philippines. Also, in the second year of his administration, when Estrada was accused of influencing an investigation in the stock market manipulation, foreign investments further declined. With the Asian Financial Crisis and climatic disturbances, the performance of the Philippine economy just got only worse.Toward the end of Estrada's administration, the fiscal deficit had doubled to more than P100 billion from a low of P49 billion in 1998. In January 2001, Estrada was finally removed from office by a second peaceful "People Power" revolution led by the Filipino youth, NGOs, and the business sector. By the near end of his term, the total external debt has increased from year 1999 US$51.157 billion to US$51.358 billion. President Estrada was the first Philippine president to be impeached by Congress, and his vice-president, Gloria Macapagal-Arroyo, became the fourteenth President of the Republic.