By Mario Casayuran
The Philippine economic team has carved out a medium-term debt management strategy to handle foreign loans that the Philippine government will enter into, particularly China.
The strategy is ‘’fiscally sound, sustainable,’’ Senator Loren Legarda, chairwoman of the Senate finance committee, replied when asked by Senate Minority Leader Franklin M. Drilon on Philippine-China loan agreements.
Sen. Loren Legarda (Senate of the Philippines official Facebook page / MANILA BULLETIN)
US Vice President Mike Pence had raised the red flag when he advised Asian countries, including the Philippines, to be careful not to fall into China’s ‘’debt trap.’’
Senate President Pro Tempore Ralph G. Recto, an economist, also expressed concerns on the ability of the Philippine government to pay its loans and whether the seven big infrastructure projects of President Duterte 5or be financed by China’s loans passed through the National Economic Development Authority (NEDA).
The unprogrammed budget for 2019 is 300 percent more than the 2018 P75 billion unprogrammed fund, Recto noted.
Legarda said the 42.1 percent debt to gross domestic product (GDP) ratio in 2017 will go down to 38.6 percent 38.6 percent in 2022.
Philippine external debt as of June, 2018 was $72.2 billion while Philippine total debts breached the P72 trillion mark.
Earlier, Bangko Sentral ng Pilipinas (Central Bank) Gov. Nestor A. Espenilla Jr. said that despite the increase in the foreign obligations, the Philippines’ external debt remain within prudent and manageable levels.
A big portion of the P197 billion unprogrammed budget funds in the proposed 2019 P3.737 trillion national budget will support foreign-assisted projects.
The foreign-assisted projects (FAPs) listed in the unprogrammed budget are the Safe Philippines Project, the Rural Agro-Enterprise Partnership, RAPID project of the Department of Trade and Industry (DTI), the DOT-PNR South Commuter Rail Project, the MRT Rehabilitation and Maintenance, the PNR South Long Haul, the Subic Clark Railway Project, the PNR North Phase 2, Maritime Safety Capability Improvement, New Cebu International Port Container Project.
Department of Finance Secretary Carlos Dominguez III had told Legarda that he and China’s lending arm, the Asian Infrastructure Investment Bank (AIIB), a multi-lateral financial organization. had met in Beijing and that one of the issues he raised is their cost of funds ‘’is a little bit high.’’
‘’So we are at the moment trying to work at getting loans that are less expensive,’’ Dominguez explained.
Dominguez explained that AIIB’s interest rate is slightly higher than that of the Asian Development Bank (ADB) but lower than the World Bank’s.
‘’Our goal in the department is always to try to get the lowest rate. AIBB has actually promised to respond positively to our request, plea,’’ he added in reference to the DOF’s request that AIIB reduces its loan interest rate.
Earlier, Department of Budget and Management (DBM) Secretary Benjamin Diokno 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.
“We’re very careful. Number one, we choose the projects we want,” Diokno said.
According to Diokno, projects proposed for financing assistance from China undergo a rigorous screening process by the NEDA.
He emphasized that only projects that have an economic internal rate of return of at least 10 percent would be considered for loan assistance from China.
On the other hand, the Philippine government is "extra careful" not to fall into the Chinese debt trap, Socioeconomic Planning Secretary Ernesto Pernia had said.
"Given the various experiences already felt by the other countries that have already dealt with China, we are more cautious," Pernia, the NEDA director-general, said.
The socioeconomic planning chief was reacting to recent news reports underscoring how a port in Sri Lanka was taken over by China because the former could no longer pay for it.
Sri Lanka pushed through with the $1-billion project despite feasibility studies concluding that it would not work.
The port sits along one of the world's busiest shipping lanes, yet drew only 34 ships in 2012.
The Sri Lankan government was forced to lease the port and 15,000 acres of land around it to China for 99 years. The deal gave China strategic economic and military footholds in the busy waterway