Aquino Fears Debt Ceiling’s Effect on Credit

MANILA —  President Corazon Aquino said Sunday a proposed ceiling on Philippine debt repayments would harm the country’s credit standing and warned Congress she might veto any attempt to impose a debt cap.

Aquino said in her regular Sunday radio talk that a debt repayments ceiling would adversely affect government efforts to obtain foreign loans needed to finance urgent development projects.

A $10.2-billion budget for 1991 approved by the Senate last week includes a provision limiting payments on the Philippines’ $29-billion external debt to 20% of 1990 export earnings.

The House of Representatives proposed a lower debt ceiling of 10% of export income.

“I have told them (the legislators) that it will really be difficult for us if we will have a debt cap because all the things we are doing now and all the loans and assistance that we are getting from different countries will be affected,” Aquino said.

“I just hope that they will be able to work out a way so that I will not have to veto this thing.”

A bicameral committee will meet today to reconcile the two versions and present the final budget to Aquino for signing.

Economic officials had said imposing a legal restriction on debt repayments would send the wrong signals to the country’s creditors and jeopardize Manila’s ability to borrow more from commercial and official sources.

Aquino said Sunday that Finance Secretary Jesus Estanislao had told her that it might be possible to reduce a controversial 9% import tax by 2% in July.

“The entire 9% cannot be removed at once until we are able to get other sources of revenue,” Aquino said.

She added: “Secretary Estanislao was telling me perhaps July could be thought as the time a 2% cut could be made.”

Aquino said the import levy was a temporary measure and would be removed as soon as Congress had passed alternative tax measures to help boost government revenues.