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How big is the Philippine debt? It’s P10.3 trillion—P647 billion of it for COVID response

By IRIS GONZALES, The Philippine STAR Published Mar 29, 2021 5:35 pm Updated Mar 29, 2021 5:58 pm

From build, build, build to borrow, borrow, borrow.

The bad news is that the Philippines, with the pandemic and all, is facing mounting debt. And this will continue to rise, no thanks to the COVID-19 pandemic and the need to fund the government’s response to it including the procurement of vaccines.

As of end-2020, the country’s total outstanding debt stood at P9.7 trillion compared to just P7.3 trillion as of end-2019.

It hit P10.37 trillion as of end-January 2021, a record high as it breached the P10 million mark. Theoretically, and to simplify this seemingly overwhelming amount, at P10.37 trillion, each of the country’s 110 million population is in debt by P94,200.

Of course that’s only theoretical. We will not, as individuals, be asked to shell out P94,200 from our pockets. At least not literally.

Every child and adult in our 110 million population is in debt by P94,200. Photo by Walter Bollozos

But make no mistake. We will all share in this burden, one way or another.

This is because our country’s debt will continue to put a dent on state coffers. Taxpayers’ money will be used to service debt. This money could be used instead for social services such as health and education.

So it is essentially money that we will all be paying for, and so will our children, our children’s children and so on.

Investment grade

The good news is that the Philippines has good credit standing. It’s like an individual having a good credit reputation among the banks because he has been a good payer in the past and still has the capacity to pay.

Last January, London-based Fitch Ratings affirmed the country’s BBB credit score. and stable outlook due to still strong medium- term growth prospects. A BBB credit rating is an investment grade rating, which means  the risk of default is low.

Fitch affirmed our ratings despite the deep economic contraction brought about by the impact of the pandemic.

As of Dec. 15, 2020, the Philippines has already borrowed the equivalent of $13.364 billion or P647 billion for COVID response.

Last year, the economy shrank 9.5%, its worst economic performance since 1947 or a little after World War II when the country started recording growth data.

But thanks to our good credit standing, the Philippines would still be able to borrow. We are not Argentina or Ecuador which already defaulted on their debts. A country in default will have a difficult time borrowing in the future and may not have extra funds to invest and pump-prime its economy.

Borrow, borrow, borrow

Borrowing is not necessarily bad. Countries do it to get extra funds to pump-prime the economy without having to increase taxes. When done correctly, public borrowings can improve the standard of living in a country.

For example, if these loans are invested into big-ticket infrastructure projects they would create employment and generate a long line of economic activities.

In short, borrowing isn’t bad especially if proceeds are put to good use and there are rewards to reap.

COVID-19 loans

A compilation of loans of the government intended as part of its COVID-19 response showed that as of Dec. 15, 2020, the Philippines has already borrowed the equivalent of $13.364 billion (P647 billion), a whopping amount.

The amount of each loan varies—from as $3 million to as high as $1.5 billion.

These loans weren’t necessarily for COVID-19 vaccines. Some were meant to provide cash grants or ayuda to households; financial relief to affected businesses; investments to spur the economy; to strengthen the Philippines’ capacity to prevent, detect, and respond to the virus and strengthen national systems for public health preparedness through the provision of medical supplies.

Shanties waiting for ayuda in 2020. In March 2021, COVID surge precipitates ECQ again. Photo by Walter Bollozos

Lenders include the World Bank, the Asian Development Bank, the Agence Francaise de Developpement and the Japan International Cooperation Agency.

Additional loans for vaccine procurement

For vaccine procurement alone, the government has secured loans amounting to $1.2 billion to date.

This includes another $500 million for the Philippines’ COVID-19 Emergency Response Project—Additional Financing (PCERP-AF) from the WB; the $400 million Second Health System Enhancement to Address and Limit COVID-19 (HEAL 2) under the Asia Pacific Vaccine Facility of the ADB and $300 million HEAL 2 loan from the China-backed Asian Infrastructure Investment Bank.

Finance Secretary Carlos Dominguez III said these loans are beings processed for signing within this month, March 2021.


Dominguez also assured the public, including lawmakers worried about the unscrupulous use of these loans, that under the terms of the loan agreements, the multilateral institutions, such as the ADB, would directly pay the suppliers of the vaccines and such purchases would have to pass the ADB’s stringent criteria.

Hence,  these  funds  for  our  vaccine  purchases  will  not be coursed through the Philippine government, Dominguez said.

President Duterte said this arrangement dispels insinuations or allegations of corruption in the government’s vaccine procurement process.

President Duterte

“Ang buong akala kasi nila ‘yong pera na bilyon na bilyon na ibinigay nila... ‘yong Kongreso, nandiyan na sa kamay natin, that it’s cold cash, at ang anuhin, nasaan na ‘yong pera? Sinasabi na natin time and again that the money is with the lending banks,” the President said. “So we have not used a single centavo of it.”

 That is good to know. Nevertheless, at the end of the day, the Philippines still needs to pay these loans and it essentially means additional money for debt service.

But Dominguez said the Duterte administration is watching the fiscal situation very carefully and it’s been good so far.

“With our credit ratings at historic high, we quickly accessed emergency loans from our development partners and the commercial markets at very low rates, tight spreads, and longer repayment periods. With our enduring financial strength, we will meet these obligations. We continue to work with the rest of the government to ensure that these funds will be spent on strengthening the economy,” he said in a speech in November last year.

The government’s plan is to vaccinate 70 million Filipinos or all adults. 

He said that from a fiscal standpoint, the health crisis and the economic contraction it precipitated posed a most difficult challenge.

“The crisis meant additional unplanned spending. The economic downturn meant a reduction in revenue flows to the government. Despite all these, we did not abandon the judicious financial management set by President Duterte when he assumed office,” Dominguez said.

It’s certainly no walk in the park to be the Philippine Finance Secretary at this time. But Dominguez, whom businessmen quietly call “the English-speaking Duterte,” is considered one of the brilliant minds in the Cabinet. He is largely the architect of Dutertenomics, the government’s plan which includes reforming the tax system, building infrastructure projects and cutting red tape.

Borrowing what we’re borrowing now was not part of the Duterte administration’s plan but was a response to the onslaught of COVID-19.

Only time will tell if these loans were worth it.

And history will be the judge if Dominguez made the right call in tapping loans for COVID-19—if the government borrowed less, enough or too much.