By LEE C. CHIPONGIAN
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the Philippines is not in any danger of defaulting on its debt payments especially with a healthy reserves or buffer fund that is expected to reach more than $90 billion this year.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
“The Philippines is one of the few developing countries that can borrow from multilateral institutions at largely concessional rates,” Diokno said adding the government via the Department of Finance has already raised some $6.9 billion of COVID-19 related loans from multilateral and bilateral sources as of Friday.
Diokno also estimated a higher-than-anticipated gross international reserves (GIR) for this year of more than $90 billion despite subdued remittances this year due to the pandemic and the large number of overseas Filipino workers that have returned home. The BSP’s baseline assumption is that remittances will grow by two to three percent this year but with repatriated OFWs, they now see a contraction of about 0.2 to 0.8 percentage point.
Diokno said the economy “might not escape a recession this year, but unlike most emerging economies it is starting from a position of strength, and thus, will not risk a debt default as a result of the COVID-19 pandemic.”
“The GIR is expected to hit more than $90 billion by end-2020,” he added, also noting that the peso continue to be stable and steady. “It is the second strongest currency (next to Japan) among 14 monitored Asian foreign currencies after the COVID-19 pandemic. The strength of the peso might be attributed to the hefty GIR and its strong economic fundamentals.” As of February this year, the GIR amounted to $88 billion.
For 2020, the BSP chief said that with fiscal stimulus, the country’s debt-to-GDP ratio “might hit” 47 percent which is “modest by international standards.” Last year, the debt-to-GDP ratio was at 40.5 percent