Businessman offers solution to mounting debt, budget deficit

Businessman Celso delos Angeles Jr. offered yesterday a solution to the country’s mounting foreign debt and ballooning budget deficit in response to Bangko Sentral ng Pilipinas Governor Rafael Buenaventura’s recent alarming pronouncement.

Buenaventura earlier expressed grave concern over the country’s debt burden which he described as so deep a crisis is forthcoming if the budget deficit is not balanced soon.

Delos Angeles, who is chairman of Legacy Consolidated Plans Inc., recommended the flotation of what he termed as Gloria Zero Coupon Bonds (GZCB) to enable the government to quickly pay the country’s foreign debt and fund infrastructure project as well as budgetary requirements.

He said the proposed zero coupon bonds are debt instruments with fixed maturity value and sold at a discount which represents the yield.

"Since the proposed zero coupon bonds will have no yearly amortization, the issuer’s cash flow pressure will be reduced," Delos Angeles pointed out.

According to Delos Angeles, "the earlier we are able to pay our increasing foreign debt, the cheaper it will be for us to settle our obligations".

Like Buenaventura, Delos Angeles sees the need to apply drastic measures and seek radical solutions to the financial crisis.

"Traditional solutions can no longer measure up so we need to be more innovative in approaching the financial problems bugging our country," he added.

Delos Angeles noted that since tax collection problems will take a long time to solve, it may be too late before the country can get out of the deep financial hole it is in despite the sustained effort by competent Customs and other revenue collection agencies.

He said that government will have a hard time forcing a taxpayer to pay more than what he normally pays for taxes annually.

"But if the taxpayer is given an option to invest in the proposed zero coupon bonds with a tax credit of 20 percent of his investment, he will most likely channel his funds to this investment instrument which, in the process, will give government effectively a cash inflow of 80 percent," Delos Angeles explained.

Moreover, the zero coupon bonds may be used as collateral with government financial institutions for small and medium enterprises and microfinance projects.

"By doing so, the country’s cash liquidity can be used for the implementation of President Arroyo’s programs. As taxpayer, I will now be motivated to invest in small and medium enterprises and microfinance projects," Delos Angeles said.