Foreign Debt and the Catholic Bishops Conference of the Philippines (1990)

CBCP Statement on the Foreign Debt Problem

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Foreign Debt Problem and the CBCP (1990)
CBCP Statement on the Foreign Debt Problem

The Catholic Bishops' Conference of the Philippines (CBCP), aware of the serious economic sufferings of our people, presents these reflections on our nation's debt crisis. As spiritual pastors, we wish to offer ethical and evangelical principles to enlighten the moral conscience of our citizens, especially of decision-makers in politics, in the economy and banking circles. Accordingly, our main objective in these pastoral reflections is not to negatively criticize nor to propose economic and political action programmes, but to fulfill our mandate from Christ to shed the light of the Gospel on present-day realities. This we do by offering guidelines based on moral and Gospel values, for we believe that a responsible solution to our debt crisis cannot be reached without respecting human dignity and promoting solidarity.

I. Our Economic Reality: A Crisis Situation

Not so long ago, the scenario of business circles included an optimistic vision of the Philippines as a newly industrializing country by the end of this decade. No longer in these pessimistic times. Our economic planning has gone back to basic fundamentals of survival.

The forecast of our Gross National Product growth has been revised downward from 4.8% before the earthquake to around 3.5% - 3.8% while our Gross Domestic Product, which represents our output of goods and services, grew by only 2.69% during the first half of this year. It is estimated that our economy stands to lose about $253.5 million from overseas remittances due to the Iraq-Kuwait War. The July 16th earthquake alone caused public infrastructure losses of around P10.1 billion and around P1.19 billion in agricultural loss.

Unfortunately, such depressing statistics do not remain as lifeless reports in a library shelf but are grim indications of the reality of suffering and misery among our people.

We Bishops, especially those of the dioceses in Northern Luzon, are daily witnesses to the sufferings among the poor when, in summer, drought turns ricelands into mini-deserts; and in the rainy season, torrential rains inundate these same fields with mud. These months, we continue to receive in our Social Action Centers, hundreds of weary and hungry families who trek for hours to reach relief supplies after their homes were buried by tons of cascading rocks. This is the reality of many of our poor, a reality which no statistics or media report can adequately convey.

II. Our Debt Crisis is a Moral Issue

We have seen the afflictions caused by Nature. But there are also sufferings that originate from human acts and decisions. While more subtle and hidden in their effects, still, their full impact on human lives could be more extensive and enduring. For the debt crisis is the paramount example of a man-made disaster.

An enormous debt was created at least in part by wrong calculations, wrong investments, wrong decisions of individuals and organizations, and most likely by their wrong moral values as well.

We recognize sincere efforts by the Government to lighten our debt burden but we must nevertheless ask:

Is it moral for citizens, especially the poor, who did not participate in these decisions, to pay for their consequences through less jobs, less schools, less hospitals and less shelter?

2. It has been estimated that through most of this decade, our people will be paying an average of $3.2 billion annually to our foreign creditors. Most of these payments are applied to interest obligations without greatly reducing the principal. We then ask: Is it moral to place our country in a kind of prolonged serfdom, seeing that these massive annual payments only serve to further weaken our ability to repay our debts?

There is every reason to conclude that the dehumanizing economic situation we find ourselves in, is not the cause but the symptom of a moral disease afflicting both debtor and creditor nations. In this context, the Church has an obligation from Christ to proclaim the truth about God and man which forms the foundation of her teachings about human dignity, freedom, social justice and human solidarity.

III. Ethical Principles

The Pontifical Commission "Iustitia et Pax" published in 1986 a document entitled "At the Service of the Human Community: An Ethical Approach to the International Debt Question." Among its key ethical propositions are the following:

The creation of new forms of solidarity: the increasing interdependence among countries demands concerted international action, for example on the debt crisis, for the promotion of the common good. There is need for new "expressions of solidarity which respect the equal dignity of all peoples rather than lead to domination by the strongest, to national egoism, to inequalities and injustices."

The acceptance of co-responsibility: the debt crisis has internal and external causes, those specific to a country's economic and political system but also those originating from the actions and decisions of the developed countries. "Acknowledgment of the sharing of responsibility for the causes will make possible a dialogue which will seek joint means of solution."

The establishment of relations of trust: the cooperation in search of solutions, between creditor and debtor nations, and between the various agents (government, commercial banks, international organizations) must be based on mutual trust. This prerequisite "nourishes belief in another person's good faith, even when difficulties prevent that person from respecting his commitments, and makes it possible to continue treating him as a partner." (emphasis added)

By shared efforts and sacrifices: in order to solve the debt crisis, "the various partners must agree on an equitable sharing of the adjustment efforts and the necessary sacrifices, taking into account the priority to be given to the needs of the most deprived peoples. (emphasis added) It is the responsibility of the countries that are better off to assume a larger share."

By fostering the participation of all: financial authorities as well as political and economic leaders have the prime responsibility for finding solutions to the debt crisis. Citizens in general should study the complexity of the debt issue and support the implementation of political efforts. It is the duty of the Church "to specify the requirements of social justice and solidarity with respect to the situations of individual countries, seen within an international context."

By identifying emergency and long-term measures: in some countries, there is need for "immediate solutions in the context of an ethics of survival". This calls for economic and social rehabilitation: recovery of growth rates, productive investments, resource creation, equitable sharing and a reform of financial and monetary institutions.

IV. Biblical Themes on the Debt Issue

Again from reviewing some ethical considerations regarding the debt issue, it will also be useful to recall those biblical themes which relate to our topic. Here, we are careful not to apply biblical themes in a simplistic or fundamentalist manner, but to discover the essence of their message on debt and its effects.

In the covenant community that was Israel, the idea demanded was that poverty and indebtedness be regularly rectified so that "There must, then, be no poor among you." (Dt. 15:4). For Israel, poverty among its citizens must not be allowed to persist nor to create a marginalized class of people whose land and labor have been taken over by an elite group. Thus Hebrew law established two institutions: the Sabbatical year (every seventh year) and the Jubilee (every fiftieth year) to provide for the redistribution of wealth within Israel. Debts were to be cancelled, persons released from pledges and liberated from slavery. And when slaves were freed, they were to be given livestock, grain and wine so that they could get themselves started in life and not easily slip back into bondage again. (Dt. 15:12-15) This was seen not as a matter of charity, but of setting up a social mechanism to prevent the gap between rich and poor from growing.

The message that this ancient norm carried to our contemporary times is to set limits to what is humanly intolerable. The fact that foreign debt has become unpayable for many countries, thereby reducing them to continuous bondage suggests the need for a new "principle of Jubilee". This would be an application of the ethical principle of "new forms of solidarity".

In the New Testament, we borrow from what the American Bishops have written:

"...Jesus uses stories of how debtors are treated as a means of helping people understand God's mercy and the obligation to reflect that mercy in our dealings with others; and in the daily prayers of Christians, we ask God to treat our debts in light of our treatment of others' debts to us.

"These biblical images do not provide either a formula for addressing the complexity of international debts or even clear principles for adjudicating a fair resolution of this major institutional question. However, the biblical imagery does provide a starting point, a way to understand creditor-debtor relations, which a purely empirical assessment of the debt problem will never offer. The biblical lessons reject an interpretation of these issues cast purely in terms of economic gain or power over others. Those who are in debt retain their dignity as well as their basic human rights, which make demands upon creditors; debtors cannot be reduced to a situation of abject poverty in order to pay debts." (USCC Administrative Board's "Statement on Relieving Third World Debt", Nos. 35-36).

The Biblical message finds expression in our times in that solidarity which Pope John Paul II defines as the supremely necessary Christian virtue in today's world. Solidarity is nourished by the principle that the goods of this world are destined for all, that the gap between the rich and the poor is a scandal in the light of the Kingdom of God. (Sollicitudo Rei Socialis, nos. 37, 38, 39).

V. Orientations

In the light of these ethical principles and biblical themes, we propose the following orientations as our contribution to ongoing dialogues and efforts to arrive at a just solution to our debt problem:

We must deal with our foreign debt problem within the context of international solidarity. Our nation cannot solve this problem alone or unilaterally. The Vatican Document on the International Debt says, "... avoid any unilateral termination of prior commitments."

We need the understanding and partnership of men and women of good will from the creditor countries. Our destinies are as intimately bound as are the lives of survivors sharing a single lifeboat. Without a global solution based on solidarity, the creditor countries' own welfare can in the final analysis, also suffer.

There have been examples of such solidarity measure. We recall the London Debt agreement of 1952 in which the greatest part of Germany's post-war debts were waived, giving that then impoverished country the chance to employ all its forces for its economic rehabilitation rather than for the repayment of its debts. Thus, the postwar recovery of Europe owes much to the generosity of those early structural adjustment loans. The precedent is there and can therefore be repeated.

In this direction, we are encouraged by the decisions of the governments of Japan and France to acknowledge the need for debt reduction. In fact, France has written off the debts of the poorest countries in sub-Sahara, Africa.

We must consider our debt crisis within the context of the ethics of survival. Our country's economy is in a critical state, as already described earlier in these reflections. We face an emergency situation that demands urgent measures and immediate solution.

It is apropos to recall here the statement of the Pontifical Commission "Iustitia et Pax", "The immediate needs of countries in such difficulties are a priority..." (II: Action in Emergency Situations). Further, "Debt service cannot be met at the price of the asphyxiation of a country's economy, and no government can morally demand of its people, privations incompatible with human dignity." (Cfr. Presentation).

It is necessary to formulate a debt relief strategy "with a human face". Previous adjustment policies have largely neglected the human aspect of development. Therefore, the strategy of an "adjustment with a human face" is one that takes full account of equity; employment and people's needs. It will also protect domestic food supplies and will support investments in human capital formation.

Here we agree with the statement of Bishop Kamphaus, then President of the German Commission "Iustitia et Pax" when he told the European Parliament that even if the demands of creditors may be just, they become unjust if their compliance requires sacrifices from a people that are incompatible with human dignity. Along these line, we should not yield to conditionalities that would further impoverish our people.

The question has been raised on whether our people should be made to repay fraudulent debts which were either used for useless prestige projects or which were the results of corruption. Again the Vatican Document on the International Debt (by the Pontifical Commission "Iustitia et Pax") has a relevant remark to the effect that repayment cannot be demanded "when loans have been granted at usurious rates or used to finance projects overpriced through fraudulent complicity." (III.3: Responsibilities of Creditors with respect to Debtors).

On this, the Administrative Board of the American Bishops' Conference has itself asked, "Why should the poor in debtor countries, who had nothing to say about accruing the debt and have received little or no benefit from it, have to bear the greater burden of its payment? (USCC Administrative Board's "Statement on Relieving Third World Debt", No. 11).

Our external debt was generated not only by global mechanisms seemingly beyond our control, but also by internal decisions and activities for which persons in our country are responsible.

We would also want to address those who have held or hold economic and political power whether by their actions, decisions and omissions in the past and present, they have not aggravated the economic conditions in our country and lessened our moral leverage in the debt negotiations. What moral leverage do we have during negotiations for the reduction of our debt if it is known that we do not check the practices of graft and corruption within the vital sectors of our society?

The search for solutions of the debt problem is a complex task. Thus, the active participation of all our social sectors especially the poor must be sought and they must be informed about the conditions and the programmes adopted to solve the debt crisis. But it should be the paramount concern of all that the proposed solutions should redound to the economic growth of the nation.

VI. Solidarity Among the Churches

Finally, we are also greatly encouraged by the role of Churches and Bishops' Conferences in Europe and America to serve as advocates for the poor in the developing countries. For example, the American Bishops in their 1987 Pastoral Letter on "Economic Justice for All: Catholic Social Teaching and the U.S. Economy" --have called for remedies which do not penalize the poor. For their part, the German Bishops in 1988 advocated a conditional remission of debts for the poorest countries. Likewise, the Federation of Swiss Protestant Churches have set up a comprehensive research project to search for concrete policy recommendations for that country's contribution to solving the debt crisis. We pray that more First World Churches will become involved in educating their faithful on the new requirements of development cooperation and in strengthening their solidarity with the Churches and peoples in the Third World.

VII. Prayer

May God Who has willed that all peoples should live as one family, grant us all the grace to approach the solution to the debt problem in a spirit of solidarity and trust and with a deep respect for the dignity of every human being. May God's Kingdom be realized among us through our collective efforts to promote solidarity in the international community.

For the Catholic Bishops' Conference of the Philippines:

(Sgd.) +LEONARDO Z. LEGASPI, OP, D.D.
Archbishop of Caceres
President, CBCP

19 September 1990.
Manila