Finishing touches

Of the more than the P12 trillion in total loans the country now owes to many of its international creditors and domestic lenders, the Philippines has borrowed P1.3 trillion alone to fight the spread of the coronavirus disease 2019 (COVID-19) pandemic. These borrowings augmented grants received by the Philippine government amounting to P2.7 billion to fund the various anti-COVID-19 programs along with 76.8 million doses of donated vaccines.

As per the official tally as of January 14 this year, the administration of outgoing President Rodrigo Duterte will be leaving behind these much foreign debts and local borrowings. Succeeding elected leaders of our country would assume them in the next six years and beyond. Based from the report of the Department of Finance (DoF) headed by Carlos “Sonny” Dominguez III, the national government raised funds, principally from foreign loans and domestic borrowings due to the unexpected outbreak of the COVID-19 pandemic in Jan. 2020.

During this period in review, the DOF reported a total of P559.08 billion in domestic borrowings were in the form of government bonds and securities. On foreign loans, the DoF quoted the following amounts of anti-COVID funds that were sourced from these multilateral institutions: P303.37 billion from Asian Development Bank (ADB); P291.95 billion from the World Bank (IBRD); P66.01 billion from Asian Infrastructure Investment Bank (AIIB); P47.56 billion from Japan International Cooperation Agency (JICA); P28.96 billion from Agence Française de Développement (AFD); and, P10.15 billion from Export-Import Bank of Korea (KEXIM).

According to the same DoF report, the Philippine government also received a total of P2.7 billion in grants for its anti-COVID campaign, namely from World Bank-European Union with P1.1 billion; from the government of Japan with P1.3 billion; and ADB with P406.2 million. To date, the DoF noted, the Philippines has received a total of 76.4 million doses of donated anti-COVID vaccines of various brands from bilateral donations as well as from the World Health Organization (WHO) COVAX Facility.

“The loans raised from bond auctions and grants helped the country in fighting the COVID-19 virus and were instrumental in restoring economic growth in 2021,” the DoF cited.

At this stage, these loans would be billed already to the next President who gets elected on May 9 and takes office on June 30 this year.

Just last Monday, the Philippines and Japan exchanged diplomatic notes on additional 30-billion Yen Loan package which is approximately P13.333 billion as credit support for our country’s emergency response to COVID-19, related social protection, relief and economic recovery stimulus measures.

Under this latest loan agreement, the repayment period is set to 11 years after a grace period of four years, with a fixed interest rate of 0.01 percent per annum. The loan aims to assist the government’s efforts in promoting anti-COVID vaccination. The latest loan package also seeks to build up public health and economic resilience in guarding against unforeseen future emergencies by providing budgetary support to the Philippine government.

Actually, these are highly concessional loans that are charged way below market interest rates like this Yen Loan package. It usually carries not more than 0.25 percent interest rate payable annually on long-term basis from 25 to 40 years. Japan is the biggest donor of official development assistance (ODA) to the Philippines.

The Bureau of the Treasury (BTr) reported the country’s debts stock rose to P12.03 trillion as of end-January from P10.33 trillion, or up 16.5 percent for the same period last year. Domestic debts, which accounted for 70 percent of the total debts stock, grew to P8.37 trillion from P7.33 trillion a year ago, or up over 14 percent. Total foreign debts rose to P3.66 trillion from P3 trillion, or this went up 22 percent.

But economists measure the national debt in terms of its ratio with the country’s gross domestic product (GDP). With expectations of 7 to 9 percent economic growth this year, the debt-to-GDP ratio is expected to slightly ease to 60.4 percent of GDP. Debt watchers though consider outstanding obligations of a country remains manageable at 60 percent of its GDP. From historical review, the Philippines debt-to-GDP ratio reached highest at 65.7 percent in 2005.

By and large, however, Filipinos and our generations ahead must pay for all these loans. “This will require a fiscal consolidation program and improved revenue collection,” the DoF admitted.

Couched with technocratic jargons, this simply means the next administrations must be able to raise and scrounge for more government revenues. These could come from higher tax collections – if no new tax laws are passed – and more generation of non-tax measures such as from State-run casinos and gambling operations franchised by the government like the controversial e-sabong.

The “consolidation program” is nothing but a euphemism to impose savings and forgoing of non-priority, non-essential expenses, and other cuts in State spending.

Incidentally, Executive Secretary Salvador Medialdea and key members of the Duterte economic team, namely, Dominguez, Trade Secretary Ramon Lopez, and Bangko Sentral ng Pilipinas Gov. Benjamin Diokno flew to the US to attend the spring meeting of the WB and the International Monetary Fund (IMF). Our ambassador to the US Jose Manuel Romualdez, who backstops them in the IMF-WB meetings and engagements in Washington D.C., disclosed they also aim to generate “public-private sector initiatives for joint venture economic plans” with top US firms.

In separate chat messages with Dominguez and Diokno, they clarified no new loan negotiations are in the works with IMF-WB. “We’re not adding to the already existing pipeline of projects,” Dominguez reassured me. “The borrowing has tapered off,” Diokno chimed.

On to the remaining less than three months before the Duterte administration bows out, we see the finishing touches in the works. That is barring any hitches like a new surge of COVID-19 cases.