Just how much money has the Philippine government borrowed so far in its fight against COVID-19?
Two weeks when the entire country was placed under enhanced community quarantine, President Rodrigo Duterte assured the public that the national coffers are sufficiently stocked and we could weather out the pandemic.
However, the tune quickly changed from reassuring to worrisome as the Philippine government announced one borrowing after another, with multiple lenders entering a loan agreement with the country.
If you’re keen to know more about the national debt we have accumulated over the past few months—and get a glimpse on how we will eventually repay these debts—read this primer on Philippine loans for COVID-19 response.
Loans, grants, and technical assistance
Since March 13, progressive think tank Ibon Foundation found out that the Duterte administration entered into 25 loan agreements with various multinational organizations. The organization divided the types of Philippine loans for COVID into three categories:
They are non-monetary assistance financed by the lender that provides the government with studies, surveys, workshops, and other projects that will improve efficiency of beneficiaries.
A grant is a type of public subsidy that shall only be given if the borrower meets all the conditions and almost always geared towards education, research, technical development, and others.
An advance sum offered by the lender to the government in exchange of staggered repayment of the principal (the amount borrowed) and interest
Philippine loans for COVID-19 response
In a span of four months, the government asked for a total of $9.05 billion, which roughly translates to ₱448.4 billion.
It may sound a humongous amount but when stacked side by side with our gross domestic product (GDP), the pandemic borrowing of the Duterte administration is around four percent of our earnings.
However, it all changes when you consider two other things: the existing debt before COVID-19 and the debt-to-GDP ratio.
Before the pandemic started, the Bureau of Treasury revealed early March that our outstanding debt to both foreign and local lenders ballooned to ₱7.76 trillion. Based on most recent reports, our outstanding borrowings are now close to ₱10 trillion by the end of the year.
Meanwhile, the aggressive uptick in loan deals over the past four months has severely affected our debt-to-GDP ratio as well. In 2019, the country’s nominal GDP hit a promising record at ₱17.66 trillion.
Last May, the Department of Finance (DOF) said that the borrowings might exceed the projected 44-percent debt-to-GDP ratio come end-2020. Compare that with the debt-to-GDP ratio of 39.6 percent when 2019 closed.
What do these numbers indicate?
Despite this, DOF Secretary Carlos Dominguez III assured the public that the country still remains creditworthy despite the deals. The cabinet member is also confident that the country can repay its debts.
“I would like to assure you and the entire Filipino people that we have the capacity to borrow. We are borrowing at very low rates and we have the capacity to pay this loan in the future,” Dominguez said.
And Dominguez isn’t alone in the positive outlook towards debt repayment. The Japan Credit Bureau shared the same optimism as the secretary as it upgraded the country’s credit rating from BBB+ to A- last month.
Meanwhile, S&P Global Ratings retained the BBB+ rating for the country, which runs contrary to the huge number of downgrades given by the company to other countries.
Timeline: The Philippines’ COVID-19 borrowing spree
Below is the government’s history of pandemic borrowing, listed in chronological order:
- March 15: The ADB gave the government a $3-million grant to help the country’s response to the outbreak
- March 18: The World Bank opened a $100-million credit line to the government to fund the COVID-19 emergency response project
- March 23: The Bangko Sentral ng Pilipinas opened a ₱300-billion credit line by offering treasury bond repurchase program with the BOT
- April 1: The ADB launched a $5 million project to give food supplies to households severely affected by COVID-19
- April 10: The United States Agency for International Development turned over a $4 million COVID-19 assistance program to the government, along with more than 1,100 cots for the Office of Civil Defense
- April 22: The USAID gave another $5.3 million worth of assistance to help fund COVID-19 testing labs in the country
- April 24: The ADB gave the country another $1.5 billion for the COVID response
- April 27: The ADB once again extended the loan by another $200 million
- April 28: The Bureau of Treasury offered 10 and 25-year global dollar bonds to investors and raised a total of $2.35 billion
- May 29: The Asian Infrastructure Investment Bank granted the government a $750 million loan for conditional COVID-19 response and expenditure support program
- May 29: The World Bank once again okayed a $500-million loan to the Philippines
- June 17: The ADB gave the Philippines fresh access to $500 million in financial package to help further address its needs to combat COVID-19
Other Philippine loans during COVID-19 pandemic
Aside from COVID-related loans and grants given to the Philippine government, the Duterte administration also borrowed an unprecedented amount for non-related projects in a short period of time.
Here are the other loans and deals entered by the Philippine government for COVID response:
- $3.9-million technical assistance for Southeast Asia Agriculture, Natural Resources, and Rural Development Facility – Phase II
- $1-million technical assistance for Using Digital Technology to Improve National Health Insurance in Asia and the Pacific
- $500-million loan for expanded social assistance project
- $400-million loan for support on Capital Market Generated Infrastructure Financing, Subprogram 1
From Japan International Cooperation Agency
- $1.1-billion official development assistance (ODA) loan for Cebu-Mactan Bridge and Coastal Road construction project
- $234-million ODA loan for Davao City Bypass construction project
From the Agence Française de Développement
- $168-million loan for expanding private participation in infrastructure program
- $112-million loan for inclusive finance development program
From the World Bank
- $370-million loan for support on parcelization of lands for individual titling
What do you think of the Philippines’ response to COVID-19? Share your thoughts in the comments.