Dominguez to Imee Marcos: Debt payment moratorium will ‘never be part’ of COVID-19 response

President Rodrigo Duterte’s chief economic manager on Tuesday (April 14) said Sen. Imee Marcos’ proposal to suspend Philippine debt payments was “narrow sighted” and was not likely to be adopted as a relief effort for the COVID-19 pandemic.

“Debt moratorium has not crossed our mind. It was never entertained or will ever be a part of our crisis response measures,” Finance Secretary Carlos G. Dominguez III said in a statement.

“The strongest pillar of the Philippines’ standing in the global economic community is that the country honors its financial obligations,” he said.

“For that reason, investor confidence in our economy is broad and deep,” Dominguez added.

“Integral to our country’s remarkable turnaround story is how credible and responsible a borrower it has become since 1986,” he said.

“Back then, our total debt-to-gross domestic product (GDP) ratio hit as high as 78.3 percent. By 1991, this ratio had gone down to 65.2 percent,” Dominguez said.

As of 2019, total debt to GDP ratio slid to 44.2 percent, while the actual debt-to-GDP ratio which excluded guarantees was an even lower 41.5 percent.

For Dominguez, the Philippines “cannot wish away our obligations at this critical time when the reliability of our word secures our economy’s capacity to bounce back once the COVID-19 pandemic is over.”

“More favorable options are available for financing our emergency and recovery programs,” he said.

“If we lose our credibility among international lenders, we will lose our ability to access low-interest, concessional financing for our recovery and stimulus programs,” Dominguez added.

The Philippines plans to borrow up to P310 billion or $6.1 billion from multiple sources—Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), World Bank and other bilateral development partners.

The money would be used to aid vulnerable sectors, boost the health care system and keep the economy from drowning.

“For this reason, a moratorium was never considered or entertained as a tool to address COVID-19,” said Dominguez.

“The country’s fundamentals are strong, and the willingness of investors and creditors to partner with the Philippines means we can negotiate new loans from a position of strength,” Dominguez said.

Marcos had also suggested using for COVID-19 response the budget items allotted to pay interest on the national government’s debt.

Dominguez, however, sought to clarify the figures being cited by Marcos. He said those included debt payments for domestic creditors that included pensioners and small depositors.

He said at least two-thirds of Philippine debts are from local sources. Senior citizens had bought debt instruments as investments, he added.

“We have built a 34-year track record, beginning with the Cory Aquino administration, of honoring our country’s obligations,” he said. The first Aquino administration had also rejected calls to suspend payments of national debts, primarily for the mothballed Bataan Nuclear Power Plant incurred during the Marcos dictatorship.

“Honoring our word has allowed us to remain as one of the most attractive investment destinations and one of the world’s favorite bond issuers,” Dominguez said.

“Rather than take an option that will tank our long-term investment and borrowing prospects, we should burnish our reputation as a borrower and a business partner with integrity and palabra de honor because this ultimately benefits the Filipino people.” said Dominguez, who had served as agriculture secretary and natural resources minister under former president Corazon Aquino.

“In the developing world, we are among the few countries able to borrow from multilateral institutions at largely concessional rates,” the finance chief said.

“The country’s strong fundamentals and commitment to fiscal and economic reforms has given it credibility with domestic and international lenders,” he said.

“Very few economies of our size can ask for better terms,” Dominguez said.

“The global community is happy to lend to us because we do not renege on our commitments,” he added.

“Under President Duterte’s watch, we continue to borrow wisely, we tax more equitably and efficiently, and we continue to spend such resources judiciously,” he said.

In contrast, foreign debt under the late dictator Ferdinand Marcos—Imee’s father who was toppled by the “people power” revolution in 1986 that installed Cory Aquino as president—skyrocketed during his over two decades in power.

Edited by TSB