Six administrations will inherit the $25.74 billion foreign loans that the Duterte administration secured during the Covid-19 pandemic, an obligation that needs to be repaid by Filipinos over the next four decades or until 2060.
Data from the Department of Finance (DOF) showed that total government offshore loans to fund the Philippines’ Covid-19 response have amounted to $25.74 billion, equivalent to P1.3 trillion as of Jan. 14, 2022.
“The loans will have to be repaid over a period of 40 years starting 2020,” Finance Chief Economist Gil S. Beltran said in his DOF Economic Bulletin dated April 16, 2022.
Since the pandemic began, the government has tapped foreign commercial creditors for P559.08 billion worth of financing, DOF data showed. This amount was raised through the sale of the so-called "Republic of the Philippines (ROP) Bonds”
The government also secured loans from the Asian Development Bank (ADB) and the World Bank amounting to P303.37 billion and P291.95 billion, respectively.
Moreover, President Duterte sought extra borrowings from the Asian Infrastructure Investment Bank (P66.01 billion), Japan International Cooperation Agency (P47.56 billion), Agence Française de Développement (P28.96 billion) and Export-Import Bank of Korea (P10.15 billion).
To payoff these debts, Beltran said it will require a “fiscal consolidation program and improved revenue collection.”
This is not the first time that the DOF raised the debt issue. Last February, Finance Secretary Carlos G. Dominguez III said the country’s next elected leaders will pay the loans secured by the Duterte administration for the pandemic response.
“Looking realistically our situation, we have to pay for Covid. I mean, we cannot just have Covid and not pay for it,” Dominguez had explained during a virtual forum hosted by financial executives.
Dominguez also pointed out that the DOF was in the process of completing a fiscal consolidation plan for the country’s next leaders.
He explained that outgrowing debts should be the top priority of the next administration in order to lower its share in relation to the gross domestic product (GDP).
In 2021, the government’s debt-to-GDP ratio rose to 60.5 percent from a historic low of 39.6 percent in 2019.
During the pandemic, the government resorted to emergency borrowings to cover the massive cost of Covid-19 response and the corresponding drop in revenues resulting from the mobility restrictions and economic slowdown spawned by the pandemic.
“The only way to make this sustainable is by growing the economy faster and investing in the future. The fiscal deficit should be lowered to cover only infrastructure investments and not operational expenses,” Dominguez said.