Imperilled privatization

The National Power Corporation is already the largest contributor to the national budget deficit. But rather than lessening its load to ease up its financial losses, the government has still given it priority for yet another set of borrowing spree.

On why it was given priority over and above the implementation of the provisions of the EPIRA law, particularly Napocor’s privatization, is still a mystery.

But one thing is sure though, the fresh borrowings for the Napocor will once again add burden to the already unmanageable budget deficit. Consider this, while the whole nation was glued to the political crisis brought about the Garci tapes and the Jueteng scandal, the government still managed to secure $400 million (more than P2 billion) in fresh borrowings for the Napocor.

Of the $400 million, $300 million was obtained through the issuance of six-year floating rate notes. The remaining $100-million secured only last week completed the financial package.

Remember that this state-owned entity is already expected to incur losses of P31 billion this year, making Napocor the largest contributor to the national budget deficit.

Napocor’s fresh borrowings of $400 million and which is guaranteed by the government will lead to de-prioritization of Napocor’s privatization, masking the urgency of selling all government-owned power assets in the power sector.

Privatization will in fact help the government raise the funds needed to pay Napocor’s debt, reduce government borrowings and reduce the amount of tax burden on Filipinos.

Napocor claims that the fund will be used partly for paying debt as well as to cover operating expense — which implies Napocor has been selling at rates inefficient enough to cover its operations and continues to rely on government guaranteed borrowings.

While it is true that Napocor is expected to break even this year, this is simply due to government having absorbed P200 billion of Napocor’s loans pursuant to the EPIRA. This of course will result in the imposition of new taxes to pay for Napocor’s debts, both old and new. Needless to say, this is a debt spiral (umutang para ipambayad sa utang), for Napocor and the government as well!

The only way to stop Napocor from taking the country down with it is to privatize it, as provided for by EPIRA law. It is a necessary step to stop the hemorrhage brought by unnecessary borrowings and to have a fresh start to the government’s worsening fiscal condition.

At this juncture, this is the only permanent, lasting solution to Napocor’s financial woes. Privatization will effectively erase Napocor’s huge debts and free up national funds for health, education, and other more worthwhile causes. It is high time we aggressively push for the privatization of Napocor, and finally rid the government of this cancer before it spreads uncontrollably.

I think Congress, which has the power of oversight on these borrowings, should look into the picture and see where the money would go (or went, in case it was utilized by Napocor). It is imperative that Congress must look into this mess because Napocor’s privatization, as embodied in the EPIRA law, could be in peril.

Who in his right mind would bid for a big conglomeration such as Napocor if its managers are busy doing new rounds of borrowings. What is worse is the fact that Napocor officials allotted for themselves P1.2-billion (although this mess is a different issue).

Adding insult to injury is the fact that these new loans were met with jubilation by no less than Bangko Sentral ng Pilipinas (BSP) Governor Amado Tetangco Jr., wallowing that Napocor’s latest borrowings shored up the country’s gross international reserves to an all-time high of $17.85 billion?

Is our country’s chief banker saying that the Philippines should celebrate because Napocor has again managed to add to our humongous national debt? It makes no sense for the Banko Sentral to trumpet its horn by saying the country’s forex reserves are at historically high levels... but in the same breath admit that this is so because of Napocor’s recent borrowing.

Budget Secretary Romulo Neri was more circumspect when he correctly pointed out that Napocor’s’s debt is taking its toll on the government’s fiscal position, with the bulk of government expenditures during the first seven months of this year going to interest payments alone.

Admit it, the government has no clear picture on what to do with the ballooning budget deficit and foreign debts. And clearer still is the fact that Napocor is gloating in debt making it the single largest contributor to the government‚s budget deficit.

Worse, government absorbed P200 billion worth of Napocor loans! Is this a good reason for a renewed borrowing frenzy? On the contrary, all of this will result in higher taxes, a direct hit to consumers already burdened by the escalating cost of basic goods and services. One need not look further than the controversial expanded VAT law, which is meant to bring in additional revenues to pay government’s debts.

Despite all this, why is Napocor digging itself (together with government and the Filipino people, for that matter) deeper into a hole it may never be able to climb out of? Worse, why do some in government appear to be in a jubilant mood? Someone please tell me what’s wrong with this picture?

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