DOF: No collateral for China loans

The country’s loan agreements with China for its infrastructure projects will not entail any collateral, according to the head of the Duterte administration’s economic team, allaying fears the Philippines will similarly fall into the mainland’s debt trap like other nations.

Amid claims the Chinese government could demand natural resources as collateral, Finance Secretary Carlos G. Dominguez III recently told reporters: “There’s no collateral—it’s a sovereign debt.”

Finance Assistant Secretary Maria Edita Z. Tan said that all of the agreements were “plain” loans.

“We are upholding Philippine rights. We have a very good credit standing. We don’t owe anybody any collateral, and we are borrowing very prudently,” according to Dominguez.

“I don’t know what the other countries are doing, but here they are not asking us for collateral. We borrowed $200 million, there was no collateral,” Dominguez said, referring to the Philippines’ first-ever panda bond issuance.

In March, 1.46 billion renminbi or about P12 billion in three-year panda bonds were issued by the government in China at a “tight” yield of 5 percent.

Due to the good turnout, the government is looking at another round of panda bond sale, although not within this year, according to Deputy Treasurer Erwin D. Sta. Ana.

Meanwhile, Dominguez and Tan said the loan agreement with China for the Metropolitan Waterworks and Sewerage System’s P10.9-billion New Centennial Water Source-Kaliwa Dam project would be signed by July.

In April, the Philippine and Chinese governments signed the P3.135-billion loan for the Chico River Pump Irrigation Project, the first flagship infrastructure project to be financed by China under the Duterte administration’s “Build, Build, Build” program.

According to the Department of Finance, the $62.09-million US-dollar denominated loan will cover 85 percent of the project’s total contract amount of P3.689 billion.

To be implemented by the National Irrigation Administration, the total project cost is P4.372 billion.

The Chinese loan would get an interest of 2 percent per annum, maturing in 20 years inclusive of a seven-year grace period, according to the DOF.