THE Philippines is bracing for the indirect, spillover impacts of economic sanctions on Russia following Vladimir Putin’s invasion of Ukraine, according to President Rodrigo Duterte’s chief economic manager.
Finance Secretary Carlos Dominguez III told Bloomberg last Wednesday (March 16) that given the Philippines’ limited trade with both Russia and Ukraine, the financial and trade sanctions on Russia by Western countries would have no direct impact on the Philippine economy.
Dominguez said he was worried that global trade disruptions affecting logistics and ease of doing business across borders, which started due to the COVID-19 pandemic, will be prolonged by the Russia-Ukraine war. “It’s like a ricocheting bullet — sometimes we get hit,” he said.
The Philippine finance chief said domestic inflation would likely be “a bit higher” due to high global commodity and food prices “but we are ready to tackle it” by giving away cash subsidies to vulnerable sectors as well as lowering tariffs on some food imports despite thumbing down proposals to suspend oil taxes.
Dominguez said it helped that rice prices had been steady since the liberalized trade allowing more imports was put in place three years ago. “The price of rice is no longer a driver of inflation.”
In a blog, the Washington-based International Monetary Fund (IMF) noted that “in Southeast Asia, wheat accounts for only 7 percent versus 42 percent for rice, for which price increases so far have been relatively contained.” The IMF warned that the jump in prices of food items—like wheat—produced in the warring nations would hurt poor countries the most.
The Philippines, for instance, is allocating at least P39.2 billion in cash doleouts to poor households, fuel subsidies to public transport drivers, as well as fuel discounts to agricultural producers.
Putin’s campaign to conquer other nations, starting with Ukraine, also delayed the Philippines’ plan to borrow funds through “green” bonds for its climate mitigation programs and projects as rich nations have yet to fulfill their financing commitments to support developing countries in their clean energy transition under the Paris Agreement.
Prior to the war, Dominguez told foreign businessmen that the Philippines was supposed to issue at least $500 million in green bonds in the coming weeks.
Before the Duterte administration steps down from office in mid-2022, Dominguez said the Philippines would likely again raise funds through yen-denominated samurai bonds, although the government relied more on the domestic debt market, which was the source of about three-fourths of yearly sovereign borrowings.
The Philippines, he said, “depend more on our domestic bond market.”
The Bureau of the Treasury (BTr), however, fully rejected P100 billion in programmed borrowings two weeks after Putin escalated his assault to a full-blown war as bid rates soared.
This week the BTr partially awarded over P22 billion out of the P50 billion it was supposed to borrow at its auctions as domestic creditors still sought high yields. (©Philippine Daily Inquirer 2022/Ben O. de Vera)
