COVID-19 foreign loans, grants hit $7.76 billion

MANILA, Philippines — Foreign borrowings, loans, and grant assistance secured by the Philippines to fight the COVID-19 pandemic amounted to a total of $7.76 billion (over P386 billion) as of July 1, with two-thirds of the proceeds already injected into the budget, the Department of Finance (DOF) said.

In a report, the DOF said $7.63 billion in financing from multilateral lenders and bilateral partners were to be spent as budgetary support, of which $5.11 billion had been disbursed to the government.

The budgetary support financing for COVID-19 response from the Manila-based Asian Development Bank (ADB) included the $1.5-billion COVID-19 active response and expenditure support (Cares) program; $200-million social protection support project (second additional financing); $400-million support to capital market generated infrastructure financing (subprogram 1); and $500-million expanded social assistance program.

From the Washington-based World Bank, the $500-million third disaster risk management development policy loan; $500-million emergency COVID-19 response development policy loan; and $200-million social welfare development and reform project 2 (additional financing).

The Philippines also borrowed $750 million from the Beijing-based Asian Infrastructure Investment Bank (AIIB), which co-financed the ADB’s Cares program.

Also included as budgetary support amid the COVID-19 pandemic was the total of $2.35 billion raised from the issuance of US dollar-denominated global bonds last April, which fetched record-low coupons across two tenors.

Among bilateral aid agencies, the Agence Française de Développement (AFD) extended $165.42 million for the expanding private participation in infrastructure program (subprogram 2), on top of $110.2 million for the inclusive finance development program (subprogram 1), both co-financed with the ADB.

The Japan International Cooperation Agency (Jica) just last Wednesday signed with the DOF the $458.95-million COVID-19 crisis response emergency support loan, making the Philippines the first country to be extended with this new highly concessional lending program offered by the Japanese government.

On top of these loans supporting the budget, the Philippines also secured from the World Bank a $100-million loan for the COVID-19 emergency response project, which the lender said in a July 1 blog on its website “will be used to personal protective equipment, essential medicines, and test kits, and expand the country’s laboratory capacity” as it was “among the worst affected by COVID-19 in Southeast Asia.”

The Philippines likewise received three grants to aid in fighting COVID-19: a total of $8 million from the ADB ($5-million rapid emergency supplies provision and $3-million COVID-19 emergency response project), as well as $18.36 million from the Japanese government to provide medical equipment to the Department of Health (DOH).

As the government had to raise more money to address the health and socioeconomic crises inflicted by COVID-19, it will have to rely more on borrowings as tax and non-tax revenues were also expected to be weak amid a recession.

In May, the Cabinet-level Development Budget Coordination Committee (DBCC) projected the debt-to-gross domestic product (GDP) ratio to hit 49.8 percent by yearend, equivalent to a record P9.6 trillion in outstanding debt, before further increasing to 51.5 percent in 2021 and 52.3 percent in 2022.

The last time that the Philippines had a debt-to-GDP ratio above 50 percent was in 2010, at 50.2 percent.

Prior to the pandemic, the Philippines’ debt-to-GDP—the ratio reflecting a country’s ability to pay its obligations—slid to 39.6 percent in 2019, the lowest since 1986.

DOF officials had nonetheless said that domestic borrowings will account for about three-fourths of annual borrowings to temper foreign exchange risks.

/MUF