Philippines ‘very careful’ with China loans

MANILA, Philippines — Budget Secretary Benjamin Diokno yesterday assuaged fears that the country may fall into a “debt trap” as he assured the public that the government is “very careful” in dealing with China’s loan offers.

The budget chief made the statement following US Vice President Mike Pence’s warning against China’s “debt diplomacy” during his speech at the Asia-Pacific Economic Cooperation (APEC) Summit over the weekend.

“We’re very careful. Number one, we choose the projects we want,” Diokno said during the Pandesal Forum in Quezon City yesterday.

According to Diokno, projects proposed for financing assistance from China undergo a rigorous screening process by the National Economic and Development Authority (NEDA).

He said only projects that have an economic internal rate of return of at least 10 percent would be considered for loan assistance from China.

Furthermore, Diokno said Manila would conduct negotiations with Beijing to ensure it would get the best possible terms for loan agreements, such as lower rates and longer payment period.

The budget chief also expressed confidence the Philippine government has the capacity to finance its obligations from China, Japan, and other development partners, given its low debt-to-gross domestic product (GDP) ratio.

Dikno said the country’s debt-to-GDP ratio is currently at 40 percent, and may further decline to 38.5 percent by the end of the Duterte administration.   

Meanwhile, the secretary also alleviated concerns that China’s loan assistance may come with “strings attached,” as claimed by Pence.

“He’s talking of some countries, I don’t want to name them,” he said.

Diokno said statements made by Pence should be “taken with a grain of salt” considering US is currently engaging in a trade war with China.

“They don’t want the whole world indebted to China. So you have to take his statement with a grain of salt,” he said.

In a speech at the 2018 APEC CEO Summit in Papua New Guinea, Pence took a swipe at China’s Belt and Road Initiative, warning countries not to fall into a debt burden which would compromise their sovereignty.

Following his statement, Finance Secretary Carlos Dominguez said the Philippine government would review the country’s loan agreements with China.

Diokno, however, said there would be no reduction in the number of loans to be signed with China despite plans to review them.

Chinese President Xi Jinping is set to visit Manila today, and is expected to sign various agreements, including loan accords for projects under the administration’s Build Build Build program.