Government financial institutions (GFIs) have joined the assembly of groups calling for the recall of a Palace order allowing government agencies and state corporations to extend credit.
The Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (Landbank) wrote Finance Secretary Margarito B. Teves recently to express their objection to President Gloria Macapagal’s Executive Order (EO) 558 issued on August 8.
Several paragraphs later, the story quotes from the letter of Rosalina de la Paz-Magat, a senior vice president at DBP.
"Direct lending by GNFAs and GOCCs will not achieve the goal of instilling market and credit discipline," she said.
I know, I know. Not exactly a blockbuster quote, at least at first glance. But consider the ultimate audience of her letter (not Teves, but President Arroyo, who as we all know is an economist by profession and a believer in free markets), and that understated warning takes on a whole new meaning. The bank official is, in effect, using the President’s own language (market dynamics, credit discipline) to criticize the new EO.
The new policy — or, rather, the return to the old, discredited policy of using GNFAs (that’s government non-financial agencies, such as the Department of Agriculture) and GOCCs (government-owned or -controlled corporations) to lend cheap money at subsidized rates, a la Masagana 99 — doesn’t strike us as an economist’s measure. The old EO had rationalized credit (again, to use the President’s econo-speak); the new one effectively politicizes a billion-peso part of it.