National Economic and Development Authority (NEDA) Secretary-General Ernesto Pernia leads the wreath-laying and flag-raising ceremonies on Friday during the 120th death anniversary of Dr. Jose P. Rizal in Tagbilaran City, Bohol. -LEO UDTOHAN/INQUIRER VISAYAS
As the Duterte administration pivots to neighboring economic giants such as China and Japan that offer financing for infrastructure projects, the share of foreign borrowings may exceed the government’s medium-term program and reach 30 percent of the total, the country’s chief economist said.
Socioeconomic Planning Secretary Ernesto M. Pernia told reporters that the yearly borrowing program of 80-percent domestic, 20-percent external until 2022 was a “very safe mix of debt.”
“We expect our debt-to-GDP (gross domestic product) ratio, which is currently on the border of 40 percent of GDP, to even go down to 35 percent in the coming years,” said Pernia, who heads state planning agency National Economic and Development Authority (NEDA).
“Of course, we have to be careful about how to handle debt or loans, and how to efficiently spend these loans,” Pernia added.
Given the huge pledges of assistance as well as potential financing to be provided by the Chinese and Japanese governments, Pernia said the borrowing mix would likely “change a bit” such that foreign borrowings could hit up to 30 percent of the total, which the NEDA chief claimed was still in a “quite healthy” level.
“But we’re not going to make external loans bigger than the share that is internally or domestically funded,” Pernia said.
In January, Finance Secretary Carlos G. Dominguez III said the government was eyeing hybrid financing arrangements to bring down borrowing costs as well as “profitably manage the leveraging of close to P1 trillion in official development assistance (ODA) and loans that it has secured from Japan and China alone in just six months of the Duterte presidency.”
“Hybrid financing would involve, for instance, a mix of ODA, which provides concessional interest rates of 0.2-0.5 percent, with development funds from the Asian Development Bank and the World Bank to execute an infrastructure project. Combining both types of financing sources would, thus, enable the government to build more big-ticket infrastructure projects. That’s like putting a jigsaw puzzle together using ODA from China and matching that with Asian Infrastructure Investment Bank and ADB funds,” Dominguez explained.
As domestic interest rates remain relatively low, the Duterte administration wanted to finance its programmed wider budget deficit equivalent to 3 percent of the gross domestic product in the next six years through a borrowing mix of 80-percent local and 20-percent foreign.
The programmed deficit was widened to ramp up government spending on infrastructure under President Duterte’s 10-point socioeconomic agenda aimed at slashing the poverty incidence to 14 percent by 2022 from 21.6 percent in 2015. JPV