The Philippines has more than enough funds to vaccinate 70 percent of its population with the $18.4-billion (about P887 billion) loans for pandemic response measures it had obtained at concessional interest rates from foreign sources, according to the Department of Finance (DOF).
Finance Undersecretary Mark Dennis Joven told a press briefing on Friday that as of April 28, the Philippines obtained $16.26 billion in external borrowings for budgetary support, or money that had been injected into the budget to fund COVID-19 response.
These include funds to purchase medical equipment and to upgrade facilities, as well as for the dole outs to poor families whenever the country or parts of it reverts to the most stringent lockdowns aimed at containing the coronavirus.
Another $2.14 billion in project loans had been secured by the Philippines since last year to finance specific projects, such as building quarantine and testing facilities, as well as granting financial aid to specific sectors.
According to estimates as of Friday by the Asian Development Bank (ADB), $30.32 billion (about P1.46 trillion), equivalent to 8.24 percent of the 2019 gross domestic product (GDP), had been allocated for policy measures which the government had put in place since the start of the pandemic to deal with the resulting health and socioeconomic crises.
If the government were to distribute this amount for pandemic support to all Filipinos, each one would receive $280.47 or over P13,500.
Joven said “most” of the earlier borrowings had already been disbursed in order to offset the weak tax collection resulting from the pandemic-induced recession, which shed millions of jobs and shuttered thousands of businesses.
The DOF official pointed out that debt had long been a part of budget financing across different administrations and even in other countries. “This forms part of efficient governance,” he said.
Joven said that of the foreign funding for budgetary support, $6.93 billion came from ADB, the World Bank, and Asian Infrastructure and Investment Bank (AIIB) based in Beijing.
Out of the total borrowings to date, Joven said $1.2 billion (about P58 billion) in loans from the three multilateral lenders would be used to procure COVID-19 vaccines as well as the nationwide mass inoculation rollout.
Joven said $600 million to $700 million out of these loans were already contracted or booked to pay for vaccines. While some supply contracts have yet to be signed, the government already locked in the doses, he said.
Some of the vaccines made by Sinovac, AstraZeneca, Moderna and Pfizer which would be arriving were being financed by these loans, he added.
But Joven said only $100 million had been drawn or released for payments to signed contracts.
Finance Secretary Carlos Dominguez III this week said about 143 million vaccine doses were expected to arrive within the year—enough to vaccinate 70 million Filipinos, or the entire adult population, to achieve herd immunity by yearend and allow a safe reopening of the economy.
Enough to pay for shots
He said P82.5 billion, including the P58 billion in loans from ADB, World Bank and AIIB, would be enough to pay for the shots.
According to Joven, Filipinos may have two choices: “Vaccinating people to lessen [COVID-19] deaths, or not borrowing money and not vaccinating people, which will result in more deaths.”
“I don’t know with you, but I don’t want to be in a situation like some other countries where deaths and infection rates have spiraled so bad, that it would be harder for the economy to recover,” he said.
“I think it’s practical to address the problem now, immediately, so that economic recovery will be faster after,” he added.
The government also obtained $1.32 billion in loans from France, Japan and South Korea, Joven said.
No strings attached
The Philippines also raised about $8 billion from commercial borrowings abroad through the sale of debt paper or bonds denominated in US dollars, euros and yen to mostly foreign investors.
During the past two months, the Philippines sold euro-denominated global bonds and yen-denominated samurai bonds at low rates. Both were met with robust demand, one of the benefits from the country’s investment-grade credit ratings which kept commercial borrowing rates low despite the pandemic.
The DOF’s website showed the Philippines also received three grants, with no strings attached, for COVID-19 response from ADB and Japan totaling $26.74 million as of early April.
Joven noted that all the foreign borrowings had low interest rates of less than 1 percent per annum and lengthier terms to repay, reaching 12 to 20 years.
As the pandemic raged, the Philippines and many other countries had turned to ramping up their sovereign borrowings to fill their financing gap in the protracted fight against COVID-19, Joven said.
During the longest and most stringent COVID-19 lockdown in the region, the country’s GDP shrank by a record 9.6 percent—the worst decline since the end of World War II.
When the economy recovers from its pandemic scars, and reverts to positive growth, Joven said the Philippines could well repay these loans.
“We purposely chose multilateral funders. Why? Because the rates they offer are very concessional … [They provide a] long tenor of payment so we can ‘chop-chop’ our amortization over very long periods of time. In some cases, it may go beyond decades or two decades,” Joven said.
In the case of the multilateral loans, he said these had a three-year grace period such that debt repayment would start in the fourth year.
“By that time [of loan maturity], we expect the economy to have recovered already and the world to have moved away from this pandemic situation.Going back to normal, it would really not be a big problem to pay for all these debts,” Joven said.