By Chino S. Leyco
The Philippines will not fall into a “debt trap” to any other country as the government expands its infrastructure investments through concessional loan financing from its development partners, the Department of Finance (DOF) assured.
Finance Secretary Carlos G. Dominguez III, at the same time, reiterated that in conformity with the constitution and Philippines laws, none of the pipeline projects funded with official development assistance (ODA) from countries like Japan and China allow for the appropriation or takeover of domestic assets in the event of a failure to pay, which will never happen.
The government’s borrowing program, Dominguez noted, remains “very conservative in the sense that we only borrow to invest in projects that will generate economic gains which are greater than the borrowing cost.”
According to Dominguez, no infrastructure project is funded through ODA without first going through a rigorous system of reviews and approvals by the Cabinet and the President, and unless it is certain that the project is economically viable and highly beneficial to the Filipino people.
“We have been warned about the so-called debt trap owing to the massive infrastructure spending and loans from China under this administration. Let me assure you that the Philippines will not fall into a debt trap to any country as we expand our infrastructure spending with ODAs,” Dominguez said.
“We draw lessons from our own history as well as that of other countries and are ensuring that we manage our debts prudently,” he added.
Dominguez said the highly concessional loans and grants received by the government to help fund the Duterte administration’s “Build, Build, Build” program will help make the economy fully competitive, create jobs, open more business opportunities, bring down logistics costs and realize better-distributed growth.
“We ask the few who understand complex ODA terms to help us battle malicious efforts to confuse and misinform the public,” he said.
Dominguez said the government’s debt is carefully structured to ensure that it does not borrow without raising its own capital for infrastructure projects, while at the same time sourcing a significant portion of financing from the local debt market to minimize exposure to adverse external factors.
He said that as of 2018, the government’s project debt exposure was only 0.66 percent to China and 9 percent to Japan in relation to the total debt.
By 2022, when most of the financing for the “Build, Build, Build” program will have been accessed, the country’s project debt to China will account for 4.5 percent, while that of Japan’s will be twice as large at 9.5 percent of the total debt.