MANILA, Philippines — Central bank approvals for state foreign borrowings continued their climb in the first quarter, reflecting the government’s scouring of funds to finance an ongoing pandemic fight.
From January to March, the Bangko Sentral ng Pilipinas (BSP) greenlighted $2.84 billion in offshore debts planned by the government, up 19.4% year-on-year. Compared with the previous quarter however, approvals decreased a larger 32.4%.
The Constitution requires the government to seek BSP’s nod before negotiating foreign loan contracts as a mechanism to keep external debt levels in check as well as monitor the proceeds’ impact on money supply, which in turn may affect inflation.
The BSP’s seven-member Monetary Board, its policymaking body, approves the debts. That said, an approval during a particular period does not mean the amounts already entered the economy, but only meant that funds were already contracted possibly for future disbursement.
It was unclear how much of the approved borrowings had already been disbursed.
Of the amount approved as of March, $1.44 billion was in the form of project loans that are allotted for specific government undertakings. These projects are named, unlike their program loan counterpart where only sectors or general purposes where money may go to are specified. The latter amounted to $600 million last quarter.
The balance of $798 million were approved in the form of offshore bonds, BSP said.
Broken down by fund utilization, $900 million was earmarked for the government’s coronavirus programs, including vaccine procurement and distribution. A smaller $798 million will be used to pay for old debts and “general financing requirements” or funds used to pay up for typical budgetary programs.
The balance will be spent on disaster resilience at $600 million, social protection ($300 million); public transport improvement ($138 million) and maritime safety ($105 million).
Since the pandemic triggered disruptive lockdowns last year, foreign borrowings have been one of the government’s go-to sources of funds to shoulder the costs of coronavirus measures like cash aid. Separate finance department data these funds already ballooned to P15.5 billion from last year to April 8 this year.
As of February, 29% of the government’s P10.4 trillion debt were sourced externally.