MANILA, Philippines — The Philippine government plans to secure up to $2 billion (almost P102 billion) in loans and grants from multilateral lenders so it can dole out aid to workers who lost their jobs while beefing up the health sector, as well as the economy’s defenses against the COVID-19 pandemic, President Duterte’s chief economic manager, said Wednesday.
“We are currently in negotiations with multilateral agencies for $1 billion up to $2 billion in funding support for [COVID-19 response]. We have to realize—we are looking at a drop in revenues. So we have to cover that gap somehow so that we maintain our pace of spending. So we are talking to multilateral agencies at the moment to do that. We want to do it early because all the countries in the world are trying to do the same thing. I think we are a step ahead of the others at this point,” Finance Secretary Carlos Dominguez said in an interview via Google Meet.
Dominguez said the Manila-based Asian Development Bank (ADB), the Washington-based World Bank, and the Beijing-based Asian Infrastructure Investment Bank (AIIB) will be tapped for loans and grants.
“They are also on skeletal force, but we are continuously working online with them. I believe that they see immediate need, and are also working fast,” Dominguez said.
The ADB earlier made available an initial $6.5-billion “rescue” package to its developing member-countries, including the Philippines. The World Bank, meanwhile, had jacked up its “fast-track” financing package for COVID-19 to $14 billion.
The Philippines already secured a commitment from the World Bank to disburse a $100-million loan for the Department of Health (DOH), on top of a $3-million grant from the ADB to buy medical supplies and equipment.
The country was also in “continuous talks” with its bilateral development partners, but Dominguez pointed out that “they, too, are in lockdowns to one extent or the other, and they are also trying to address their domestic situations.”
Dominguez said the additional funds will be specifically spent to “support the people who have lost their livelihoods, and to increase our capacity to combat the virus and protect our front-liners.”
About P200 billion will be given away to displaced workers during the next two months under the emergency bill approved by President Duterte last Monday.
The Department of Labor and Employment (Dole) had said over 111,000 workers were affected by temporary stoppage and flexible work arrangements to date.
In a separate interview with Bloomberg Television, Dominguez said the Philippines was “going to tap all markets” for its commercial borrowings to ramp up financing for COVID-19 response.
“Depends on how long it [the pandemic] will last but we are prepared, very well prepared to increase our debt levels,” Dominguez said.
“We have reduced our debt levels from over 70 percent of GDP [gross domestic product] to only 41 percent of GDP now. So we are in a very good position to combat this coronavirus, and we have the debt capacity to do that,” the Finance chief added.
Later asked how much higher the Philippines could afford its debt-to-GDP ratio to rise since economic growth, as a base, will also be impacted, Dominguez replied: “We are willing to do as much as it takes, but this point I don’t have the exact number.”
The state planning agency National Economic and Development Authority (Neda) had projected GDP growth to slow to 4.3 percent or even contract by 0.6 percent this year, depending on interventions to arrest the impact of COVID-19.
Higher borrowings will also offset the estimated foregone tax revenues as COVID-19 took its toll on businesses and livelihood, which Dominguez said would reach P286.4 billion if the Philippine economy posted zero growth this year, or a higher P318.9 billion if GDP contracted by 1 percent.
In the case of fuel, Dominguez said revenue collections were expected to be slashed by P14 billion as both global demand and prices drop.
Given expectations of lower revenues even as the government will still spend all of its P4.1-trillion national budget for 2020, Dominguez said the budget deficit could balloon to “a little more than 4 percent” of GDP, which he deemed as still “reasonable” although wider than the programmed 3.2 percent of GDP for 2020.
“We would most likely realign some items, but we will still keep on the ‘Build, Build, Build’—that is our primary engine of growth,” Dominguez said, referring to the Duterte administration’s ambitious infrastructure program.
While a much wider budget deficit may not augur well to the Philippines’ plan to secure “A” credit ratings within the next two years, Dominguez told Bloomberg Television: “We understand the concerns of the credit rating agencies, but again I suppose we are not the only ones in this boat. I think practically the whole world is facing the same problems that we do.”
“Our main concern now is no longer the credit rating agencies’ opinion of us, but the survival of our people—the support to those whose livelihood are affected, and, of course, supporting our general economy to be ready for the inevitable return to normalcy,” Dominguez added.
“We are like in a battle. In the first part of the battle, we must take care of the essentials, and then as the battle develops we will take a look at the damage to the economy. And therefore that’s the time when we will plan on what we are going to do for the stimulus program. But now, I think we are still in the assessment stage. We don’t know exactly the total damage, but there is damage. So we’ll attend to the immediate emergency, which is to provide livelihood, to provide safety equipment and to do a general support to the economy,” Dominguez said.