The Philippines has maintained its strong fiscal position with government assurances it can always afford to pay its foreign debt, the Duterte administration’s chief economic manager said.

In a statement, Finance Secretary Carlos G. Dominguez III said that borrowing money has proven to be an effective tool for productive spending to drive economic growth and ensure immediate funding for emergencies.

At the same time, Dominguez emphasized that the borrowed money was used for “productive investments” like infrastructure projects that spur growth and create jobs, not for debt servicing.

Foreign borrowings intended to help fund the country’s unplanned expenditures for its COVID-19 response were well spent, Dominguez said. He cited government emergency assistance to vulnerable families and other pandemic-hit sectors of the economy.

Through prudent fiscal management, Dominguez said the country was able to pull down its borrowing costs, as shown by the ratio of debt interest payments to expenditures, which dropped to 9.5 percent in 2019 from 13.9 percent in 2016.

The ratio of debt interest payments to revenue also significantly dropped to only 11.5 percent in 2019 from 14.7 percent in 2015, he added.

According to the International Finance Group (IFG) of the Department of Finance (DOF), the Philippines’ outstanding external debt is only 25.2 percent of the country’s gross national income (GNI), which covers all income earned by a country’s people and businesses. This means that the country is in a strong position to service foreign borrowings in the medium- to long-term, Dominguez said.

In addition, the Philippines’ gross international reserves (GIR) as a percentage to its total external debt has historically performed relatively at par with the region’s average, excluding high-income countries, Dominguez said.

As of end-2020, the Philippines’ GIR stood at $110.12 billion, an amount that can easily cover its short-term debt 7.8 times over.

“Moreover, external repayments can be easily met, given the sustained healthy level of GIR at 15.6 times the country’s debt service burden in 2020,” Dominguez said.

He said this sound and prudent management of the country’s GIR ensures that the government can service its external debt obligations and absorb shocks during any crisis.

“Sound and prudent reserve management also creates a level of confidence in markets that the Philippines can meet its external obligations,” Dominguez said.

“This high level of confidence is reflected in the Philippines’ high credit ratings, which has remained unchanged amid the series of rating downgrades and negative rating outlooks in 2020 as a result of the global economic upheaval triggered by the COVID-19 pandemic,” he added.