Foreign loans, grants to fight COVID balloon to $22.51 billion

MANILA, Philippines — The government already received $19.72 billion (about P989 billion), or 88.5 percent, of the $22.51 billion (P1.13 trillion) in foreign financing that the Philippines secured during the past one-and-a-half years to beef up its COVID-19 war chest, the Department of Finance (DOF) said.

In a report, the DOF said this represented the amount so far disbursed from external borrowings—including official development assistance and offshore bond issuances—as well as foreign grants as of Sept. 5 and was slightly up from $19.65 billion in August.

The bulk or $20.06 billion of the approved funds are for budgetary support financing or borrowings to cover the deficit in the national budget. These mostly came from loans extended by multilateral lenders and bilateral development partners as well as the proceeds from the sale of foreign currency-denominated bonds.

The Philippines also got $2.39 billion in project loan financing for specific projects intended for COVID-19 response.

The project loans included a total of $1.2 billion worth from the Manila-based Asian Development Bank (ADB), the Beijing-based Asian Infrastructure Investment Bank and the Washington-based World Bank, which the national government had set aside for vaccine procurement.

Vaccine procurement

The three lenders directly paid vaccine manufacturers after the government signed the supply contracts.

On top of these loans, the Philippines also received $54.06 million in grants from the ADB, the World Bank, the European Union and Japan to aid in the protracted battle against the prolonged pandemic.

Finance Secretary Carlos Dominguez III told senators on Wednesday that while the government tapped more debt amid the COVID-19 health emergency, public borrowing remained well within sustainable levels.

He said total gross borrowings for 2022 were programmed to drop to P2.5 trillion from about P3 trillion expected this year.

These borrowings, he added, would support both the public health response and the economic investments needed to spur growth.

Following the pattern set the past few years, the bulk of the borrowings would be sourced locally, the finance chief said.

Global shock

“I would like to emphasize again that the increase in our debt level is only temporary. It did not stem from profligate public spending but rather resulted from a universal shock that deteriorated the financial positions of almost all countries around the world,” Dominguez explained.

He said the principal contributors to the increase in the country’s debt were the weakening of the economy and lower revenue collections due to the lockdowns, both of which were expected to recover quickly as soon as the infections have been contained.

This was reflected in the swelling of the government’s budget deficit at the end of the first seven months by about a fifth to P837.3 billion, as growth in spending outpaced that of revenue collection.

The Bureau of the Treasury’s latest cash operations report showed that the end-July fiscal deficit was 19.5-percent bigger than the P700.6 billion posted last year.

Government spending on public goods and services from January to July rose 8.2 percent year-on-year to P2.58 trillion, outpacing the 3.5-percent increase in seven-month tax and nontax revenues to P1.75 trillion.