Philippines’ debt must be cancelled to support typhoon recovery effort – UN expert

Voicing concern that the Philippines’ post-typhoon reconstruction and recovery efforts could be undermined by its heavy debt load, a United Nations independent human rights expert today issued a strong call on international creditors to cancel the country’s debt and to provide unrestricted grant aid instead of new loans.

“Grant aid, not new loans, is needed to overcome the impact of the tropical cyclone which struck the country five months ago,” said Cephas Lumina, the independent expert tasked with monitoring the effects of foreign debt on the enjoyment of all human rights, particularly economic, social and cultural rights.

Of great concern, he stressed, was that reconstruction, development and realization of economic and social rights will be undermined if the high debt stock of the country is further enlarged to unsustainable levels.

Noting the international support provided the Philippines in the aftermath of Typhoon Haiyan, Mr. Lumina underscored that more than $22 million leaves the country daily to pay off overseas debts.

“While around $3 billion has left the country to serve its debt since the typhoon struck, the country has received so far only $417 million for its strategic response plan by international and private donors, about half of the total relief requested,” the expert stressed.

Although over one fourth of its population lives in poverty, the Philippines is classified as a lower Middle Income Country and therefore has been disqualified from international debt relief programmes. This year alone, the Philippines is supposed to pay $8.8 billion debt.

To date, the World Bank has provided a $500 million support loan and a $480 million loan for rebuilding infrastructure and social services while the Asian Development Bank has offered nearly $900 million of assistance. However, most of this was in the form of new loans and only $23 million was given in grants.

In theory, loans for reconstruction cannot generate returns to allow the debt to be paid. For his part, Mr. Lumina highlighted the importance of cancelling debt by international lenders to ensure that the Country can recover.

“The disaster should rather serve as an opportunity for lenders to acknowledge that odious debts emanating from the rule under Ferdinand Marcos should be cancelled,” Mr. Lumina underscored.

Up to $10 billion is thought to have been embezzled or stolen during the Marcos regime (1965-1986), but international lenders that had provided loans continued to demand repayment after he was deposed.

As of December 2013, about one fifth of Philippines external debt was owed to the World Bank and the Asian Development Bank. The country’s largest bilateral loaners are Japan, the United States of America, United Kingdom, France and Germany.

Typhoon Haiyan, thought to be the most powerful such storm ever to hit land, left some 4 million displaced and 500,000 houses destroyed. The cyclone had a devastating impact on the country’s infrastructure, hospitals, schools and public services causing $12 billion in estimated damage.

Independent experts or special rapporteurs are appointed by the UN Human Rights Council to examine and report back on a country situation or a specific human rights theme. The positions are honorary and the experts are not UN staff, nor are they paid for their work.