Gov’t eyes raising P436B in foreign loans for COVID-19 response efforts

The Philippine government is aiming to raise around P436 billion or roughly $8.72 billion in loans from foreign sources  for COVID-19 response and economic recovery efforts.

In an interview on Dobol B sa News TV on Saturday, Finance Assistant Secretary Antonio Lambino II said the P436-billion target in foreign loan financing for the whole year is anchored on the administration’s sound debt management strategy.

“Medyo lumaki ang utang natin ngayong taon dahil nilalabanan natin itong COVID-19 hindi naman po natin na-budget itong laban na ito dahil nag-ulat naman ang buong mundo dito sa pandemiya ng COVID-19,” Labino said.

“Kaya’t tulad ng maraming bansa uutang tayo ng mas malaki,” he said.

Despite the plan to raise loans, the Finance official said the Philippines will not default on its foreign debt despite the pandemic.

Maganda ‘yung standing natin as a borrowing country meron pong magandang indicator na binigay satin katulad ng pagtaas ng ating credit rating,” Lambino said.

In the middle of the health crisis, the Japan Credit Rating Agency Ltd. upgraded the country’s foreign currency long-term issuer rating to ‘A-,’ noting that the Philippines' fiscal soundness is expected to be impaired, as its fiscal deficit is "justifiable" and government debt is "comparatively subdued." 

Likewise, the S&P Global Ratings maintained its BBB+ credit rating for the country as it expect the economy will rebound after the pandemic.

The amount of the country’s debt compared to the size of the economy is also at a “respectable” level, according to the Finance official.

As of the first quarter of the year, the government’s debt-to-gross domestic product ratio dropped to 41.8% from 42.0% year-on-year. 

A lower debt-to-GDP ratio is generally seen as favorable, as it indicates that the country is able to repay its debts.

Economic managers have projected that revenue collection this year will be lower at 13.6% of the gross domestic product (GDP) at P2.61 trillion compared to expected spending level at P4.18 trillion or 21.7% of GDP due to the economic fallout resulting from the health crisis.

This led to a projected increased deficit level at P1.56 trillion or 8.1% of GDP, higher than the earlier assumed 5.3% in March. To finance the deficit, economic managers see an increase in borrowing which will be around 50% of GDP.

The World Bank said that a debt level equivalent to half of the size of the economy is 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. 

As of June 11, the Philippine government has raised a total of $6.4 billion (more than P300 billion) from loans extended by the World Bank, AIIB, and the Asian Development Bank (ADB) as well as the recent dual-tranche issuance of US dollar-denominated global bonds, according to President Rodrigo Duterte’s report to Congress on Monday.

Of this amount, Duterte said $6.2 billion represented “newly contracted loans” from the World Bank, ADB and the Asian Infrastructure Investment Bank (AIIB) as well as the dual-tranche issuance of US dollar-denominated global bonds.

In a text message, National Treasurer Rosalia de Leon confirmed a DOF report that of the $6.4 billion in foreign loans raised around $4.05 billion were already disbursed to the government or is now in the state's coffers. —LBG, GMA News