Investments to uplift the poorest and most vulnerable sectors in the Philippines may be funded by more foreign borrowings and other fiscal savings from more-than-enough US dollar reserves, the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) said.
"Applying a relatively conservative parameter, several developing countries with external debt below 30 percent could consider borrowing. Eleven countries in Asia and the Pacific meet this criterion — among them Azerbaijan, Bangladesh, India, Myanmar, Nepal, the Philippines, Timor-Leste, and Turkmenistan could potentially borrow to invest in social protection," Unescap said in its "Protecting our Future Today: Social Protection in Asia and the Pacific" report published this month.
The latest Bureau of the Treasury (BTr) data showed that as of end-August, the Philippines' foreign debt amounted to P4.76 trillion or 30.6 percent of the total P15.55-trillion outstanding obligations.
The national government borrows more locally, mainly through treasury bills and bonds, as domestic banks and creditors remain awash in cash.
To finance priority development programs and projects, the Philippines seeks official development assistance (ODA) — cheap loans, grants and technical assistance — from multilateral lenders such the Manila-based Asian Development Bank (ADB), the China-led Asian Infrastructure Investment Bank (AIIB) and the Washington-based World Bank, as well as bilateral partners like Japan.
The ADB just last month approved its 2024 to 2029 lending program for the Philippines amounting to $24 billion or about P1.36 trillion.
The World Bank also has in its pipeline over $3.6 billion, or about P204 Billion, worth of financing for the Philippines for its fiscal year 2025, covering the period July 1 of this year to June 30 next year.
The eight forthcoming World Bank loans are the $750-million Second Digital Transformation Development Policy Loan (DPL); $700-million Pagkilos - Locally-Led Climate Action; $600-million First Energy Transition and Climate Resilience DPL; $509.2-million Health System Resilience Project; $455-million Mindanao Transport Connectivity Improvement Project; $287.2-million Digital Infrastructure Project; $250-million Water Supply and Sanitation Project; and $67.3-million Civil Service Modernization Project.
The AIIB's 2023 annual report, meanwhile, showed that the Philippines was its beneficiary of $2.05 billion in sovereign-backed financing across five projects — the biggest for any AIIB member.
The Japan International Cooperation Agency (JICA) is likewise preparing more than 10 candidate-projects for the Philippines — mostly infrastructure — for next year.
Besides additional foreign borrowings, Unescap said that "countries can tap into fiscal savings and state revenue, such as that stored in sovereign wealth funds, or utilize excess foreign exchange reserves."
"Social protection is an investment and not just a cost, with the potential of generating positive economic multiplier effects as shown in recent studies. Relaxing restrictions on investment of fiscal and foreign exchange reserves in favor of social investment could strengthen social development and generate positive economic multiplier effects in the medium term, which in turn would strengthen general government revenue," Unescap explained.
The Philippines' US dollar stock hit a record-high $111.98 billion in end-September.
Unescap noted that the Philippines was among 12 Asia-Pacific countries which in 2022 not only had foreign exchange reserves bigger or equal to 1.5 times the imports' cover of three months deemed ample under the Triffin criteria, but also had short-term debt to forex reserves ratio below 25 percent under the Greenspan-Guidotti criteria.
Based on the latest BTr data, the national government's short-term debts maturing in less than a year reached P706.61 billion as of end-August, accounting for only 4.5 percent of total.
Nearly four-fifths of the outstanding public debt are long-term liabilities that will mature in over 10 years, amounting to P12.39 trillion in end-August.
Referring to the Triffin and Greenspan-Guidotti criteria, Unescap explained that "these are two popular measures to assess the adequacy of foreign exchange reserves and are referred to as safe-level benchmarks."
"Based on this assessment, these [12] countries could invest excess reserves in socioeconomic development, including social protection," Unescap said.