Health Services or Debt Servicing?: SAPs in the Philippines and the Healthcare Delivery System

Saturday, 26 July 2014: 1:50 PM

Erlinda Castro Palaganas, PhD
Institute Of Management, College of Social Sciences, University of the Philippines Baguio, Baguio City, Philippines
Ruel Dupan Caricativo, BA
College of Social Sciences, Department of Economics and Political Science, University of the Philippines Baguio, Baguio City, Philippines


To discuss using a critical social perspective  severe consequences on the country's health care delivery system of the imposition of Structural Adjustment Programs (SAPs) in the Philippines through the International Monetary Fund and World Bank (IMF-WB). This will present SAPs as a socio-cultural determinant of health in the efforts of a comprehensive health promotion framework.


This qualitative study is a review of existing evidences on the impacts of SAPs in the Philippine social sector during the 1980s to early 2000s. 


There are several channels through which the negative impacts of SAPs in the social sector are manifested. These channels include poverty; human resource development; population dislocation, migration, and brain drain; disproportional effects on women; and, civil unrest and conflict. The purpose of this article is to establish a relationship between SAPs and its conditionalities and government policies which had gross negative impacts to health care services and health human resource development.

The establishment of IMF and WB in 1944 during the Bretton Woods Conference rests on the belief that an unregulated market would result to depression, poverty and another major war. However, what was decisive in the said conference was the “reality of American power” in the face of European destruction after World War II. The IMF and WB, driven by the neoliberal ideology, have been forcing developing countries with debt-related conditionalities embodied in the Washington consensus under the guise of promoting the values of democracy and free trade.

During the 1980s, developing countries were unable to pay their loans from Western commercial banks which went on a lending spree during the mid to late 1970s after rising oil prices filled their coffers with petro-dollars. This debt crisis gave Washington the opportunity to “blast open” the developing countries. The SAPs and its conditionalities served as a disciplining mechanism used by developed countries to exercise indirect control over developing countries. These conditionalities include enforced privatization of industries (including necessities such as health care), cuts in government spending, liberalizing of capital markets, market-based pricing (which tends to raise the cost of basic goods), higher interest rates (which reduces access to credit), and trade liberalization (which reduces barriers to trade and foreign investment such as tariffs and import duties). But the SAPs evolved to cover more areas of domestic policy including labor laws, health care, and environmental regulations, among others.

The Philippines suffered significant macroeconomic setbacks in the 1980s. The crisis from oil price hikes in 1973-1974 and 1980-1981 overlapped with a major political crisis triggered by the assassination of Senator Benigno Aquino Jr. in 1983 producing the worst post-war economic crisis in the country. This was the backdrop of the imposition of SAPs in the Philippines. However, the intervention of the IMF-WB’s SAPs and its conditionalities like trade liberalization, privatization, and cuts in government spending resulted to the decline of the country’s GNP levels. The lowest annual average in GDP growth also took place during the period of 1980 to 1989. The effect of this stunted economic growth was severely felt by poor Filipinos. Since the 1980s, chronic poverty, especially in the rural areas, has plagued the Philippines. From 1985 to 2003, the share in the national income of the poorest 60% of the population has decreased by 1.8% (25.8% of the total income) while the share of the richest 20% increased by 1.2% (53.3% of the total income).

The review of existing evidences showed that the budget for social services like health care has struggled due to continued debt payments. From 1986-2007, the government’s interest payments on public foreign and domestic debt averaged roughly three times the spending on health care services. The problem associated with foreign debt has historical antecedents. During the administration of the former President Ferdinand Marcos, he issued Presidential Decree 1177 (Budget Reform Decree of 1977) which stipulated automatic appropriations for debt servicing from the national budget. His successor, the former President Corazon Aquino continued this policy through Executive order 2092 (Administrative Code of 1987).

In addition, the dismal budget for health care services became a crucial factor for Filipino health workers to look for better opportunities overseas. It was in 1974 under the Marcos administration that export of labor was encouraged through the Labor Export Policy supposedly as one of the drivers for economic growth. But the literature revealed that the primary objectives of the LEP were: (1) to address the increasing surplus of reserved labor force both in the urban centers and in the countryside which was being slowly transformed as the social base of the rising discontent against the Marcos administration; and, (2) to generate resources in the form of dollar remittances for the country’s ballooning foreign debt. Labor export remains to be the major dollar earner for the Philippine economy. According to the International Labor Organization (ILO), the Philippines is the primary source of migrant workers worldwide bringing in almost US$ 21 billion in annual remittances.

The migration of Filipino health professionals reveals the gross negative impact of SAPs and its conditionalities on human resource development. External migration is a manifestation of the Philippines’ backward, export-oriented and import-dependent economy lacking in capacity to build industries and create adequate jobs for its citizens. The country is losing human resources vital to domestic production, especially with the exodus of highly skilled workers and professionals. From 1972 to 1987, the Bureau of Labor and Employment Statistics showed an increasing outflow of unskilled production workers. However, during the period of 1992-2004, there was a continued rise in deployment of highly skilled professional and service sector workers. Still, the government encourages labor export as a means of finding a solution to the rising unemployment problem, to reduce social tensions, and to earn dollars that would finance imports and debt servicing.

Labor export has also led to the following patterns: (1) commodification of Filipino migrant labor since the “overseas Filipino worker (OFW) phenomenon” has become an industry linking source to receiving countries; (2) trafficking of women in domestic service and in entertainment and sex industries in the receiving countries; (3) creation of an exploitable and expendable labor force in the receiving countries; and, (4) feminization of migrant labor since Filipino women comprises majority of labor export.


In conclusion, this review showed that SAPs-related conditionalities imposed by the IMF and WB had severe consequences for the Philippines. These “adjustment programs” resulted to gross negative impacts in the country’s social sector manifested in the declining quality of health care services and the dismal health human resource development. In addition, these programs play a determinant role in the persistent overseas migration of Filipino human resources, especially its health personnel. And this has work, most of the time, at the expense of themselves, their family, and their fellow Filipinos.