The government, standing up to the challenges of the coronavirus pandemic and its economic fallout, plans to raise around P436 billion or roughly $8.72 billion in loans from foreign sources for its COVID-19 response and economic recovery efforts.
In an interview on Dobol B sa News TV on Saturday beamed nationwide, Finance Assistant Secretary Antonio Lambino II said the P436-billion target in foreign loan financing for the whole year was anchored on what he called the administration’s sound debt management strategy.
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Lambino said despite the plan to raise loans, the Finance official said the Philippines would not default on its foreign debt despite the pandemic.
In the middle of the health crisis, which has claimed thousands in infections and death toll, the Japan Credit Rating Agency Ltd. upgraded the country’s foreign currency long-term issuer rating to ‘A-,’ noting the Philippines’ fiscal soundness was expected to be impaired, as its fiscal deficit was “justifiable” and government debt was “comparatively subdued.”
At the same time, the S&P Global Ratings maintained its BBB+ credit rating for the country as it expected the economy would rebound after the pandemic.
Lambino also said the amount of the country’s debt compared to the size of the economy was at a “respectable” level, adding as of the first quarter of the year, the government’s debt-to-gross domestic product ratio dropped to 41.8 percent from 42.0 percent year-on-year.
A lower debt-to-GDP ratio is generally seen as favorable, as it indicates the country is able to repay its debts.
Economic managers have projected that revenue collection in 2020 would be lower at 13.6 percent of the gross domestic product (GDP) at P2.61 trillion compared to expected spending level at P4.18 trillion or 21.7 percent of GDP due to the economic fallout resulting from the health crisis.
The World Bank said a debt level equivalent to half of the size of the economy was still a safe or manageable level for the Philippines as the government intends to increase debt level to augment funds for COVID-19 response and recovery efforts.
According to Malacanang, the Duterte administration had thus far borrowed from foreign lenders nearly $5.8 billion to finance its efforts against the pandemic.
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Presidential spokesman Harry Roque told an online briefing two days earlier: “We have so far borrowed $5.758B, that’s the total loan we have for our COVID responses.
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Roque, citing data from the Department of Finance, Roque presented the breakdown of the mentioned total foreign loans of the Philippines as of June 4:
Asian Development Bank COVID-19 Active Response and Expenditure Support Program – $1.5 billion
ADB Social Protection Support Project – Second Additional Financing – $200 million
World Bank Third Disaster Risk Management Development Policy Loan – $500 million
Republic of the Philippines Bonds Due 2045 with 2.950 percent coupon – $1.350 billion
ROP Bonds Due 2030 with 2.457 percent coupon – $1 billion
WB Emergency COVID-19 Response Development Policy Loan – $500 million
ADB Support to Capital Market Generated Infrastructure Financing Subprogram 1 – $400 million
WB Social Welfare Development and Reform Project II – Additional Financing – $200 million
ADB COVID-19 Emergency Response Project – $3 million
ADB Rapid Emergency Supplies Provision – $5 million
WB COVID-19 Emergency Response Project – $100 million
According to Finance Secretary Carlos Dominguez III, $2.26 billion of the external borrowings were already disbursed or injected into the government’s COVID-19 war chest.
At the same time, he said the Department of Finance was raising money through domestic and foreign borrowings to fund the government’s COVID-19 efforts with the country enjoying low and concessional rates.