New PH-US debt-for-nature deals on the table, says DOF

Department of Finance

The American and Philippine governments are exploring the possibility of entering into new debt-for-nature and debt-for-climate arrangements to finance the country’s global climate commitments.

According to the Department of Finance (DOF), these were part of bigger discussions on a potential partnership to help shore up local revenue collection with support from the US Department of the Treasury.

“This includes the possible collaboration for new debt-for-nature and debt-for-climate arrangements to finance the Philippines’ global climate commitments,” the DOF said.

The debt-for-nature and debt-for-climate are financial mechanisms that allow countries to reduce their debt burden in exchange for commitments to protect the environment.

Since 2022, the Philippine and US governments have finalized two debt-for-nature swaps totaling $40 million.

These agreements allow Philippine debt payments owed to the US to be redirected toward forest protection, biodiversity conservation and climate action initiatives.

Positive outlook

Finance Secretary Ralph Recto noted during the meeting with US Treasury senior officials led by Undersecretary Jay Shambaugh the country’s positive economic outlook as well as the business reforms.

Recto highlighted key sectors poised for US investment, particularly in defense and security, in light of the Philippine government’s recent enactment of the Self-Reliant Defense Posture Revitalization Act.

This act aims to strengthen local defense industries, enhance military modernization efforts and promote partnerships with allied nations.

The finance chief emphasized the Philippines’ strategic position as a key security partner of the United States, highlighting the longstanding alliance and the Mutual Defense Treaty between the two nations.

Prime hub

He also pointed out that the recent Trilateral Partnership involving the United States, the Philippines and Japan further strengthens the country’s role as a prime hub for American businesses, especially in high-value industries like semiconductors, renewable energy, power grids, telecommunications, data centers and cybersecurity.

Meanwhile, the US government said that it provided technical assistance to the Bureau of the Treasury to boost the liquidity and resilience of the Philippines’ domestic debt market since 2015.

“This paved the way for an improved primary dealer system, new liability management instruments and a modern financial market infrastructure for government securities,” the statement said.