Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 81)
The main purpose of Presidential Decree No. 81 is to amend Republic Act No. 4860 to provide responsible foreign borrowing legislation to support the government's reconstruction, development of infrastructure, food production, and industrialization programs.
The President of the Philippines is authorized to contract foreign loans, credits, including supplier's credit and deferred payment arrangements on behalf of the Republic of the Philippines.
Loans can be contracted to undertake government projects in industrial, agricultural, economic, and social development; lend proceeds to government-owned or controlled corporations for development projects; and lend to the Development Bank of the Philippines for relending to private sector projects.
At least seventy-five percent of the loans, credits, or indebtedness must be spent for income-generating projects.
The total loans authorized shall not exceed one billion US dollars or its foreign currency equivalent, with terms of payment of not less than 10 years, except for loans contracted for national security or rehabilitation after natural calamities.
Private borrowers must be Filipino citizens or corporations organized under Philippine laws with at least 70% of their outstanding and paid-up capital owned by Filipino citizens throughout the loan period; failure to maintain this results in the loan being immediately due with penalties.
The entire obligation or any unpaid balance becomes due and demandable, and the debtor must pay a special penalty of two percent of the total amount due.
The President may agree to waive or modify laws granting preferences or restrictions on international competitive bidding when necessary but should encourage qualified domestic firms' participation as much as possible and grant at least a 15% preference to Philippine-produced articles, materials, or supplies when bidding is conducted.
The President must submit to Congress within 30 days after each regular session a separate report detailing the amount of loans, credits, and indebtedness contracted or negotiated, the terms and conditions, and the purposes or projects financed.
All revenues, after deducting expenses for operation and maintenance, are to be turned over in full to the National Treasury and appropriated for loan payment. Budgetary savings may be allocated to cover any deficiency, and if still insufficient, funds from the National Treasury not otherwise appropriated shall be used.