Metro Manila (CNN Philippines, April 30) — The Finance Department has secured loans worth $18.4 billion (about ₱890 billion) from foreign sources to support planned spending under the national budget and for key government projects, an agency official said Friday.
Finance Undersecretary Mark Dennis Joven said $16.26 billion (around ₱786.8 billion) of the amount is for budget support while $2.14 billion (about ₱103.5 billion) is for project financing.
Of the budgetary support debt, $6.93 billion came from multilateral lenders such as the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank. $1.32 billion had been sourced from bilateral partners like Japan, South Korea and France, Joven told a virtual government briefing.
The government also raised $8 billion from commercial markets from its foreign-dominated bond offerings.
Joven said these had already been dispersed beginning last year, with the government needing to augment the budget as it earns much-reduced revenues amid the COVID-19 pandemic. Tax and customs duty collections have taken a hit as the health crisis forced businesses to close down and dampens private consumption.
On the flipside, the government needs to proceed with its expenditures, both program and pandemic-related.
“We (already) have normal or program expenditures to run a government. On top of that, because of the pandemic, we need to give money for social amelioration, we need to provide money to increase healthcare capacity. We need additional money to basically support the poor,” Joven explained.
The gap resulting from continuing expenditures amid dwindling revenues will then be filled in the short run by the budgetary support loans, he added.
Government spending that exceeds revenues that it collects leads to a budget deficit, which had already ballooned to ₱191.4 billion as of March, according to the Treasury Bureau. A fiscal deficit prompts the state to incur more loans to sustain development initiatives.
Joven likewise noted that the Philippines’ foreign loans for COVID-19 vaccine procurement remain at $1.2 billion (about ₱58 billion), coming mainly from the World Bank, ADB, and AIIB. This amount is part of the country’s ₱72.5-billion overall budget for the purchase of vaccines, he noted.
The Finance official further explained that they “purposely” chose to borrow from multilateral institutions due to the lower interest rates they charge. Loans with these foreign entities come with a nominal interest rate per annum of less than 1% and a long tenor of payment, allowing the country to spread out amortization over many years.
By then, the local economy should have already stabilized along with the rest of the world, he said.
However, he added that the loans are ultimately about the urgency of purchasing vaccines immediately to prevent the coronavirus disease from claiming more lives.
“More importantly, I think we need to address the elephant in the room. Right now we are faced with a choice of vaccinating people to lessen deaths, or not borrowing money and not vaccinating people which will result in more deaths,” Joven said.
“I think it’s practical to address the problem now immediately so that mas mabilis din yung economic recovery after [is much faster],” he added.
Several institutions, including the World Bank and ADB, have downgraded their economic growth forecasts for the Philippines this year, mainly citing the alarming rise in COVID-19 cases and resulting tighter quarantine restrictions that further hamper business activity and consumer spending.
Both lenders’ forecasts hover below the 6.5% to 7.5% growth target band set by the country’s economic managers for the economy this 2021.
