THE Bangko Sentral ng Pilipinas (BSP) on Tuesday reported a significant rise in the foreign public-sector loans it approved in 2018, compared to that of 2017, in an effort to amply finance the government’s infrastructure development projects.
Monetary Board-approved foreign loans of the national government (NG) more than doubled in 2018 to hit $7.355 billion during the year, from the 2017 level of $3.486 billion.
Under the Constitution, the BSP —through its Monetary Board—is required to give prior approval for all foreign loans to be contracted or guaranteed by the Republic of the Philippines.
Similarly, all foreign borrowing proposals by the NG, government agencies and government financial institutions must be submitted for approval-in-principle by the Monetary Board before actual negotiations commence.
This is to fulfill the BSP’s mandate in external debt management by keeping external debt service requirements at manageable levels to ensure external debt sustainability.
The BSP said the public-sector loans during the year
consisted of: $3.602-billion bonds; 12 project loans amounting to $2.853
billion; and three program loans
amounting to $900 million. These public-sector borrowings are expected to finance projects on transport connectivity
such as roads, railways, port and airport infrastructure, irrigation and
agriculture development, flood management, and the reconstruction and
development of Marawi City, according to the BSP.
Of the $7.355-billion total approved public sector loans for the year, about 18 percent or $1.36 billion will fund five infrastructure flagship projects under the current administration’s “Build, Build, Build” program.
These are: the Metro Manila Subway Project, Phase I, the Chico River Pump Irrigation Project, the New Cebu International Container Port Project, the New Bohol Airport Construction and Sustainable Environment Protection Project, Phase II and the Cavite Industrial Area Flood Risk Management Project.
The Central Bank, however, quickly gave assurances that while public-sector loans rose significantly during the year, the external debt position remains at prudent levels.
In the first quarter of 2019, the Philippines’ outstanding external debt stood at $80.4 billion, up by 1.9 percent from the end-2018 level of $79 billion.
The BSP also said that despite the rise in external debt, the country’s debt service ratio (DSR) has consistently remained at single-digit levels. The DSR stood at 5.1 percent as of end-March 2019, well below the international benchmark of 20 to 25 percent.
The DSR relates principal and interest payments—or the so-called debt service burden—to exports of goods and receipts from services and primary income. It is a measure of adequacy of the country’s foreign-exchange earnings to meet maturing debt obligations.