Foreign Loans Reach $18.4 Billion for Budget Support and Government Projects

Foreign loans amounting to $18.4 billion (approximately ₱890 billion) have been secured by the Finance Department as of end-April to support the national budget as well as fund key government projects.

Of the $18.4 billion loans, $16.26 billion (around ₱786.8 billion) is allotted for budget support while the remaining $2.14 billion (about ₱103.5 billion) is for project financing, said Finance Undersecretary Mark Dennis Joven.

$6.93 billion of the support was sourced from multilateral lenders like World Bank, Asian Development Bank (ADB), and Asian Infrastructure Investment Bank (AIIB). $1.32 billion came from bilateral partners like Japan, South Korea, and France. Another $8 billion was raised by the government through its foreign-denominated bond offerings.

According to Joven, these funds had already been dispersed beginning last year to boost the national budget. Meanwhile, the government proceeds with its program and pandemic-related expenditures. The budgetary support loans are in place to fill the gaps that might be brought about by the government’s continued expenditures, Joven explained.

A budget deficit, caused by government spending exceeding revenue collection, is what leads the government to acquire more loans to sustain development initiatives. According to the Treasury Bureau, the country’s budget deficit had already reached ₱191.4 billion as of March.

The country’s foreign loans for COVID-19 vaccine procurement remain at $1.2 billion (about ₱58 billion), which is part of the ₱72.5-billion overall budget for the purchase of vaccines. Joven noted that these loans were primarily sourced from the World Bank, ADB, and AIIB.

He said that they “purposely” chose to borrow from multilateral institutions due to their lower interest rates of less than 1% per annum. This will allow the country to spread out amortization over many years while the economy recovers.

More than anything, the loans are ultimately about the urgency of purchasing vaccines immediately to reduce Covid-related deaths.

“More importantly, I think we need to address the elephant in the room. Right now we are faced with a choice of vaccinating people to lessen deaths, or not borrowing money and not vaccinating people which will result in more deaths,” said Joven.

“I think it’s practical to address the problem now immediately so that mas mabilis din yung economic recovery after [is much faster],” he added.

Source: CNN PH