Surge in Philippine Foreign Borrowings: A Drive for Infrastructure Enhancement

The year 2023 witnessed a marked escalation in the foreign borrowings of the Marcos administration, with the Bangko Sentral ng Pilipinas (BSP) reporting a substantial 40.36% increase compared to the figures of the previous year. This considerable rise, primarily channeled into infrastructure projects, underscores the administration’s ambitious drive to revitalize and expand the nation’s infrastructure landscape.

According to the recent disclosure by the BSP, the Monetary Board (MB) sanctioned a total of $14.49 billion in public sector foreign borrowings in the past year, a significant leap from the $10.32 billion approved in 2022. This influx of new external debt is a contributor to the government’s cumulative debt, which swelled to a staggering P14.51 trillion as of November of the same year. In a notable uptick, the fourth quarter of 2023 alone saw the MB green-lighting seven new foreign loans totaling $3.32 billion, marking a 65.8 percent year-on-year increase.

The oversight of the BSP, as mandated by Section 20, Article VII of the 1987 Constitution, ensures a careful vetting process for foreign loans, aiming for a prudent utilization of resources and maintaining the external debt at manageable levels. This prerequisite of MB’s “approval-in-principle” for foreign borrowing proposals from the government and its entities is pivotal in ensuring fiscal responsibility.

Delving into the specifics of the BSP’s report, the public sector foreign borrowings ratified by the MB in the past year encompassed two bond issuances valued at $4 billion, 12 project loans totaling $5.67 billion, and 10 program loans aggregating to $4.82 billion. The year 2023 saw a significant growth in MB-approved program loans, which were 5.5 times larger than the previous year, alongside a 21.2 percent increase in project loans. These substantial increments overshadowed the 16.14-percent decrease in offshore bond sales noted last year.

Notably, 28.10 percent, or $4.07 billion, of the total offshore debts approved by the MB in 2023 were allocated to infrastructure projects. This strategic focus aligns with President Marcos’s objective to significantly boost infrastructure spending, targeting an ambitious 5 to 6 percent of the gross domestic product.

As the Philippines embarks on this extensive infrastructural development, the careful orchestration of foreign borrowings reflects a concerted effort to balance economic growth with fiscal prudence.