MANILA – Finance secretary Carlos Dominguez III has dismissed fears that the Philippines is drowning in debt to China, saying the country’s debt to China stands at approximately one percent of its total debt.
Dominguez said by the time the term of President Rodrigo Duterte ends, the Philippines will still owe more debts to other countries than to China.
“At the end of 2022 if all our projects funded by China we are gonna borrow money against those, our total debt to China will be 4.5 percent of our total debt. The debt to Japan will be 9.5 percent. Now I don’t know why people are not saying we are gonna drown in Japanese debt,” he said.
Dominguez assured the public that they screen debt to China using the same standards as with any other loans.
“The debt for projects funded by China go through the same stringent processes, number one. And number two, we negotiate very hard for those terms. We negotiate for as long a term as possible and as low an interest as possible,” the Finance chief said.
The Philippines stands to invest over P8 trillion over the next few years on 75 projects to lift the economy and make the country competitive.
The aggressive borrowing has pushed the country’s total debt to a new high of P7.293 trillion in 2018. However, Dominguez said these debts are manageable as the Philippines debt-to-GDP ratio has declined on the back of a healthy growing economy.
He said during the Arroyo administration, the ratio was at 75 percent. It went down to around 55 percent during the Aquino administration. At present, it’s at 41.5 percent.
Dominguez said this will further decline to 38.5 percent of GDP by 2022.
“If we are not growing but borrowing that is really bad, but since we are growing we have the ability to borrow more because we have the productive ability to pay more,” he said.
As the Philippines moves toward becoming a upper middle income country, Dominguez warns that the cost of borrowing may increase as the country will no longer qualify for the special window extended to low-income countries.
He lamented the past administration’s failure to borrow money to invest in infrastructure at a time when cost of money was lower than it is at present.
“From 2010 to 2016 the cost of money around the world was near zero. That was the best time to borrow and we did not borrow. That is the big failure of the past administration,” Dominguez said.
“They were not aggressive enough to fund projects when [the] costs were really, really low. Now that we came in borrowing, costs have gone up because the economic environment has changed.”
To keep debts within manageable level, the Finance Department makes sure its takes into consideration the government’s ability to service debt at the same time investing the loans in projects that will yield benefit to the people.
“The important thing about debt is to make sure that they are invested in projects that whose economic return is higher than the cost of the debt and so far this is what we have done,” Dominguez said. (GMA News)