DOF: PH debt burden remains manageable
Despite a string of loans that the government recently secured —and more upcoming borrowings in the pipeline—to finance COVID-19 response and economic recovery from the pandemic-induced recession, President Duterte’s chief economic manager said the Philippines’ debt level remained manageable.
Referring to the $300-million policy support for the inclusive finance development program (subprogram 2) approved by the Manila-based Asian Development Bank (ADB) last Friday, Finance Secretary Carlos G. Dominguez III said that “even with this loan, our debt position will remain strong and sustainable.”
As the economy fell into a recession during the first half while the government’s borrowings surged, the debt-to-gross domestic product (GDP) ratio climbed to 48.1 percent as of June from 43.4 percent in March and 39.6 percent in 2019.
The national government’s outstanding debt hit a new record-high of P9.05 trillion in June, while GDP contracted by an average of 9 percent during the first two quarters.
Since the government will borrow P3 trillion each this year and in 2021 to better address the health and socioeconomic crises inflicted by the COVID-19 pandemic, the Philippines’ debt-to-GDP ratio was projected to further rise to 53.9 percent by year’s end and 58.3 percent in 2021.
The last time the Philippines had a debt-to-GDP above 50 percent was 50.2 percent in 2010.
If attained, the projected debt-to-GDP ratios in 2020 and 2021 would be the highest since the 58.8 percent recorded in 2006.
However, Dominguez pointed out that the loans being secured, such as the ADB’s lending for the Philippines’ national strategy for financial inclusion, were public investments whose “returns will accrue to millions of working Filipino families and small businesses who are currently excluded from the financial system” and boost efforts to rebuild the economy.
“Financial inclusion is a pillar of the Duterte administration’s socioeconomic agenda. The approval of the ADB’s inclusive finance development program, subprogram 2, will help the government reach its financial inclusion targets. Filipino families will be less vulnerable to onerous lending practices and government subsidies can reach beneficiaries faster and more efficiently,” Dominguez said.
This ADB facility will support the accelerated rollout of the national identification system, which will enable more Filipinos to open bank accounts and speed up the delivery of social assistance programs. The loan will also support the strengthening of agriculture value chains, financial literacy in basic education, digital payments, and Islamic banking.
“The ADB program will support our country’s efforts to digitalize our banking and payments system. COVID-19 has underscored how important digital systems and contactless transactions are for economic resilience,” Dominguez added.
Earlier this month, the ADB extended to the Philippines the $400-million policy loan for the competitive and inclusive agriculture development program (subprogram 1), while it was also expected to approve the $125-million health systems enhancement to address and limit (Heal) COVID-19 loan before the month ends.
For 2020, the ADB had programmed to lend to the Philippines a record $4.2 billion, the bulk of which will be spent to boost the fight against COVID-19. INQ
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