Government’s BSP-approved foreign loans eased in 2021

Government borrowings sourced from foreign lenders and approved by the Monetary Board settled at $13.1 billion in 2021, a 26-percent drop from the $17.7 billion green lighted in 2020.

The 1987 Philippine Constitution requires prior approval by the highest policy making body of the Bangko Sentral ng Pilipinas (BSP) for all foreign loans that the public sector—the national government itself as well as its agencies and financial institutions—will take or guarantee.

Also, before actual negotiations can begin, proposals for foreign borrowings must be submitted to the Monetary Board for approvals-in-principle.

For pandemic response

According to the BSP, almost half or $5.9 billion of borrowings from abroad that were secured last year were meant mainly for the government’s response to the COVID-19 pandemic, including the purchase of vaccines as well as social protection and support for economic recovery.

Another $5.9 billion was earmarked for the government’s general financing needs while $400 million was intended for “other infrastructure projects.”

In 2021, government borrowings were made mostly through the issuance of bonds amounting to $6.2 billion, loans taken for programs ($3.9 billion), as well as specific projects ($3.1 billion).

In 2020, foreign borrowings ballooned by 83 percent from the prepandemic level of $9.7 billion in 2019 as the government scrambled to address the initial brunt of COVID-19 and shore up the economy crippled by the public health crisis.

Borrowings approved in 2021 ebbed, though still about 30-percent higher than prepandemic debt, as the government issued fewer bonds and signed up for fewer program loans.

Disaster risk reduction

In the fourth quarter of 2021 alone, foreign debt reached $3 billion, 90 percent or $2.7 billion of which was for COVID-19 response while the rest was for disaster risk reduction.

Fourth-quarter borrowings were 28-percent lower than the $4.2 billion approved in the same period of 2020.

According to the Department of Finance, foreign funds—loans taken as well as grants received—for COVID-19 response have reached a total of $25.9 billion or P1.3 trillion as of Jan. 14.

Of the combined amount, $22.25 billion came in the form of loans from multilateral lenders and bilateral development partners as well as offshore commercial borrowings through sovereign bonds.

The latest inflows include $1.1 billion from the World Bank, $1 billion from the Asian Development Bank (ADB), $285 million from the Agence Française de Développement and $100 million from the Export-Import Bank of Korea-Economic Development Cooperation Fund.

In 2021 alone, the Philippines secured a total of $2 billion from the World Bank, ADB and Asian Infrastructure Investment Bank specifically for the purchase of vaccine and booster shots.

As of the end of November 2021, the national government’s debt stock was pegged at P11.93 trillion, according to the Bureau of the Treasury. At the end of 2020, the debt stock was recorded at P10.25 trillion.