In issuing Administrative Order 19, dated Oct. 26, a copy of which was obtained by The STAR yesterday, President Arroyo cited reports that some government entities have entered into foreign currency loan negotiations without prior clearance from Finance Secretary Jose Isidro Camacho.
Such loans may result in obligations that may hamper the sound management of fiscal resources, the President pointed out.
President Arroyo invoked Letter of Instructions (LOI) 158 dated January1974 which requires all foreign loan proposals by government agencies to be submitted to the Monetary Board "for approval in principle prior to the commencement of actual negotiations, in which the secretary of finance and the Central Bank (now Bangko Sentral ng Pilipinas) governor act as co-chief negotiators."
LOI 158 was issued by the late President Marcos at the height of the first currency crisis that the Philippines experienced which led to its seeking a foreign debt repayment moratorium.
President Arroyo also invoked Title II, Chapter I, Section 2 of the Administrative Code of 1987, which tasked the DOF with the "judicious management of government’s financial resources."
As such, she said, the DOF is empowered to review, approve and manage all public sector debt, whether foreign or domestic, to ensure that all borrowed funds are effectively utilized and promptly serviced by the government.
President Arroyo also recognized the DOF’s authority over fiscal matters as provided for in Republic Act 7653 or the New Central Bank Act which requires that, prior to conducting credit operations abroad, the government shall, through the secretary of finance, request the opinion in writing of the Monetary Board on the transaction’s monetary implications.
In all instances, the President ordered, where the agreement or contract entails a foreign currency denominated loan, the secretary of finance shall, together with BSP governor or their authorized representatives, lead the negotiations for such loans along with the representatives of the concerned government agency applying for loan.
The President further instructed all concerned government agencies to submit their annual borrowing programs to the finance secretary at least two months before the beginning of each fiscal year.