MANILA, Philippines — The Department of Finance (DOF) reiterated that China’s financing assistance to the Philippines for its flagship infrastructure projects do not come with conditions.
Finance Secretary Carlos Dominguez said the government does not need to surrender any of its assets to China, in the event the Philippines fails to settle its obligations.
“In conformity with the constitution and laws of the Phi-lippines, none of the pipeline projects allow for appropriation or takeover of domestic assets in the event of failure to pay which hollows out our sovereignty,” he said.
Moreover, he expressed confidence that the government would not fall into a debt trap with any country, as it manages its liabilities with prudence.
For one, he said infrastructure projects undergo a rigorous vetting system, as only projects that are economically viable are approved.
He said the government’s borrowing program is “conservative” as it ensures that official development assistance (ODA) loans are allocated only for projects that have economic gains greater than the borrowing cost.
Dominguez said bulk of the country’s debt is sourced from domestic lenders to minimize risks from external developments.
He said the share of Chinese financing to the government’s total debt stock is projected to reach 4.5 percent by 2022, once most of the financing for infrastructure projects have been accessed.
This is lower than the share of Japanese loans to the country’s total debt, which is expected to settle at 9.5 percent in the same year.
Dominguez also expressed confidence that the Philippines would not default on its loan from China.
The Philippines earlier signed a $62.09 million loan agreement with China for the Chico River Pump Irrigation project, and another $211.21 million loan for the New Centennial Water Source-Kaliwa Dam project.
Supreme Court Senior Associate Justice Antonio Carpio earlier warned that China might end up seizing Philippine patrimonial assets if these loans are not repaid.
Carpio said patrimonial assets, or those that are not for public use or public service or for the development of national wealth, include the gas reserves in Recto Bank, an area off Palawan also known as Reed Bank.
The DOF, for its part, has continuously denied allegations that loans extended by China to the Philippines were disadvantageous.
Dominguez said the Duterte administration was able to secure lower interest rates and fees, plus a longer grade period under its loan agreements with China as compared to those obtained by the past administration.