The Department of Finance (DOF) made this announcement as the country faces increasingly problematic access to the international credit market in the wake of an expected wave of downgrades by the three major credit rating agencies: Moody’s, Standard & Poors and Fitch Ratings.
The administration has been winding down its ODA availments for the last three to four years because it could not afford the required counterpart financing.
According to the DOF, however, the country’s future foreign borrowing will come mainly from ODA and the bulk of total borrowing requirements would come from the domestic market.
Finance Secretary Juanita Amatong told reporters that ODAs would be the Arroyo administration’s primary source of foreign borrowings although she said this was only an offshoot of the administration’s thrust to depend mainly on domestic borrowing.
Amatong denied that the government’s access to the international market was beginning to close down despite the outcome of the administration’s recent international roadshow that sources described as a "near-disaster".
Amatong’s decision, however, would reverse years of downscaling that has been the thrust of the National Economic and Development Authority (NEDA) because the government no longer had the resources to support ODAs.
ODAs are assistance packages that come from either bilateral or multilateral sources, broken down into program and project loans.
Program loans are major facilities whose proceeds could be used for general budgetary support provided the government would meet the conditions, normally long-range policy reforms.
Project loans, on the other hand, are project-specific loans that support undertakings that the government would otherwise not be able to afford.
Both kinds of ODA loans require some form of government counterpart funding because most ODA sources refuse to hand down dole-out assistance that do not require government commitment.
According to Amatong, however, the Arroyo administration intended to increase its utilization of ODAs despite the government’s lack of internally-generated funds.
"Our thrust is to borrow locally, whatever foreign borrowing we will do will be in the form of ODAs," Amatong said.
For next year, the Arroyo administration said it intended to source only 22 percent of its total borrowing requirement from the foreign market and 78 percent would come from domestic borrowing.
According to the Bangko Sentral ng Pilipinas (BSP), however, the government would have to borrow at least 45 percent of its borrowing requirement from the foreign credit market based on the amount of forex-denominated obligations that are scheduled to mature next year.