THE Department of Finance (DOF) said it borrowed and secured grants for a total of $17.06 billion, roughly P819.38 billion, from foreign lenders in 2020 in a bid to plug the record-high P1.38-trillion fiscal deficit that the Philippine government incurred as the economy was crippled by “poor governance” against the Covid-19 pandemic.
Finance Undersecretary Mark Dennis Y.C. Joven said in a statement that the bulk of the total external financing or around $15.44 billion (about P741.58 billion) is for the emergency requirements requested by the national government presumably for the a response to the pandemic. Joven said the remaining $1.62 billion (about P77.8 billion) is for other initiatives like infrastructure projects.
“Because of a higher emergency funding requirement, the amount of external financing in 2020 increased by 75.43 percent year-on-year,” he explained.
Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo has written in a column that “It is about time we stopped blaming the lockdown for the deepest recession we suffered in decades. The lockdown is simply the result of poor governance of our public health system.”
Joven, who heads the DOF’s International Finance Group (IFG), added the amount also represents an overall 33-percent expansion of the external borrowing program from 2016 to 2020.
He said in a report that the DOF secured $7.73 billion (45.3 percent) from multilateral lenders, $2.86 billion (16.7 percent) from the Philippines’s bilateral partners and $6.47 billion (37.9 percent) from commercial markets.
Of the total external financing secured last year, Joven said $14.52 billion was contracted for budget support to help cover a deficit that hit 7.6 percent of gross domestic product (GDP).
The Bureau of the Treasury has yet to release the official full-year budget deficit data before the end of this month.
Meanwhile, the remaining $2.54 billion came in the form of project loans negotiated by the IFG to support key government projects that will be implemented over several years starting 2020.
Out of the $14.52 billion in budgetary support financing, $12.18 billion was already disbursed as of end-December 2020, according to the statement.
The budgetary support financing secured by DOF last year was comprised of $8.05 billion in Official Development Assistance (ODA), according to Joven. He added that another $6.47 billion was from funds raised in the overseas bond markets.
Aside from loans, the IFG also processed grants and technical assistance amounting to $859.53 million last year, of which $26.74 million is intended for government spending for a “Covid-19 response.”
In 2020, the IFG also facilitated the provision of various donations, such as testing kits, masks, personal protective equipment (PPEs), ventilators, face shields, and others, from China, according to Joven.
There is also a pending $77.38 million from an Agreement on Economic and Technical Cooperation that the DOF signed recently with the China International Development Cooperation Agency (Cidca) may be fully or partially used for government’s “Covid-19 response.” Joven said the amount and its use is still “subject to discussions with the Chinese government.”
For this year, Joven said they are aiming to secure a total of $23.71 billion in external financing to cover the budget deficit and fund priority projects. He noted that $8.06 billion (34 percent) will be contracted for budget support purposes while $15.65 billion (66 percent) will be used to fund government projects.
Government’s hunt for funds from foreign sources is hinged on its expectation this year’s budget deficit would further widen to P1.78 trillion or 8.9 percent of the country’s GDP.
“We are planning to source a total of $7.67 billion in loans and grants from multilateral institutions, $10.54 billion from our bilateral partners; and raise $5.5 billion from the commercial markets this year,” Joven said.
In securing financing from external sources, Joven said the DOF has always maintained “its bias towards cheaper and multilateral loans.”
“The government has consistently availed debt for budget support, recognizing that program loans and global bonds provide more flexibility in terms of utilization,” he said.
In 2020, the government posted a record-high outstanding debt of P9.795 trillion and a 14-year-high debt-to-GDP ratio of P54.5 percent. This came a year after the country recorded an outstanding debt level of P7.73 trillion as it snatched a historic low debt-to-GDP ratio of 39.6 percent.
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