The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board has approved $14.49 billion worth of public sector foreign borrowings last year, up by 40.4 percent compared to $10.32 billion in 2022.
Public sector borrowings are comprised of both project loans and program loans. It also includes sovereign bond sale for National Government (NG) general financing requirements such infrastructure-related developments and Covid-related response.
The BSP on Monday, Jan. 22, reported that they approved 14 medium to long term loans last year worth $14.49 billion.
These include the following: two bond issuances worth $4 billion; 12 project loans worth $5.67 billion; and 10 program loans amounting to $4.82 billion.
Last year, the BSP approved $4.77 billion worth of bond issuance; $4.68 billion of project loans; and $870 million of program loans.
The BSP noted that the approved 2023 public sector foreign borrowings will fund NG infrastructure projects including transportation development of $4.07 billion or 28.10 percent of the total; economic recovery and development, environmental protection and climate resilience projects and programs worth $3.07 billion or 21.16 percent; Covid-19 pandemic response projects and programs worth $2.27 billion or 15.64 percent; agriculture projects worth $880 million or 6.05 percent; and education projects worth $210 million or 1.45 percent
For the fourth quarter of 2023, the BSP approved seven public sector foreign borrowings amounting to $3.32 billion. This was 65.80 percent higher than the $2 billion recorded in the same period in 2022.
Public sector borrowings need to be reviewed and approved by the Monetary Board to make sure foreign debt level continue to be manageable.
The review and approval process is part of the BSP mandate to assess all public sector or government foreign borrowings under Section 20, Article VII of the 1987 Philippine Constitution.
The BSP reiterated that it “promotes the judicious use of the resources and ensures that external debt requirements are at manageable levels, to support external debt sustainability.”
As of end-September 2023, the country’s outstanding external debt went up by 10.12 percent to $118.833 billion versus $107.91 billion same period in 2022. On a quarterly basis, the external debt rose by 0.8 percent from $117.9 billion reported end-June this year.
Public sector external debt declined to $73.7 billion in the third quarter from $74.5 billion in the second quarter. Its share to total likewise dropped to 62 percent from 63.2 percent a quarter ago.
About $67.2 billion or 91.1 percent of public sector obligations were NG borrowings, while the remaining $6.5 billion were borrowings of government-owned and controlled corporations, government financial institutions and the BSP.
The BSP reviews both the public and private sector’s medium- and long-term foreign loans or borrowings from non-residents, including offshore issuances of debt instruments, and their plans to issue onshore debt instruments that require settlement in foreign currency.
In every review of the country’s foreign borrowing plans, the BSP also takes into consideration any foreign borrowing limit if they have one, at any given year.
The BSP makes it mandatory to submit foreign borrowing plans to monitor the magnitude and timing of foreign financing requirements which would help them in their capital flows projections and its implications on the economy.
The BSP also wants to know the purpose – particularly the private sector’s – why they have to borrow from overseas. Banks, foreign parent companies and affiliates, borrow offshore via the issuance of bonds or securities in the international capital markets.
From the submissions of both the private and public sector of their planned foreign loans, the BSP could estimate what it called an “indicative funding requirements” every year.