Opposition lawmaker Magdalo Rep. Gary Alejano has filed a House resolution calling on President Rodrigo Duterte to fully disclose the loan conditions for all projects under his much-touted “build, build, build” infrastructure program.
House Resolution No. 1612 “strongly urges” Mr. Duterte to disclose the loan terms to Congress “to promote transparency.”
The resolution, which mostly tackled Chinese loans, stressed the need to allow the House and the Senate to review and assess “the possible impacts of such loans to our debt-servicing capacity and national economy.”
Alejano described the so-called “Dutertenomics” as “fueled by such expensive loans mainly from China.”
Alejano noted that while the Duterte administration had revealed its dealings with Beijing for loans and investments, “it has been less transparent about the conditions and potential implications of these loans.”
“In light of a looming debt crisis, if such loans went unchecked, it is up to Congress and the people to put pressure on the administration to shine a light on such proceedings and open the loans up to sensible and informed governmental debate,” the resolution read.
Financial leverage
Alejano pointed out that the country risked “entering into debt bondage with its lenders, especially China.”
He said Beijing could use its “severe financial leverage” over the Philippines by strengthening its claims in the South China Sea.
“The loans could be utilized as a valuable weapon to erode Filipino sovereignty and the conditions of the loans used as a useful negotiating weapon to further Chinese territorial interests in the region,” the resolution read.
Ballooning debt
Alejano said the infrastructure program was expected to more than double the $123-billion national government debt to $290 billion, excluding interest.
If high interest rates are taken into account, the country’s debt could even reach “over a trillion US dollars in 10 years,” the resolution read.
Assuming that a 10-percent interest rate is imposed, the
national debt could reach $452 billion.
This would bring the country’s debt-to-gross domestic product (GDP) ratio to 197 percent, the second worst in the world (in layman’s terms, this meant the debt is double the total value of all goods and services produced within the country).
Even if the loan interest was only 5 percent, Alejano claimed the debt would increase by $275 billion in 10 years and bring the debt-to-GDP ratio to 136 percent.
These figures were the same as those projected by political risk analyst Andres Corr in a Forbes article dated May 13, 2017.
Aside from loans from China, the resolution also mentioned “other potential lenders, such as Japan.”