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Economist reminds Philippines: Utilize loans responsibly

CEBU, Philippines - The Philippine government is reminded to responsibly spend the loans it is getting from foreign governments to realize its development goals.

Economist Cielito Habito said it is important for the Philippine government to make sure the loans are used well.

In a recent interview, Habito, economics professor at the Ateneo de Manila University, said it doesn't really matter where the country's loans come from, what's important is making sure it is able to spend them for the right projects it really needs.

And not for the interest of contractors and suppliers, he said.

The former economic planning chief raised the challenge for the country to use its loan responsibly, noting that project implementation has always been a problem in the country.

Earlier reports quoted Trade Secretary Ramon Lopez as saying that only 20 percent of the P8.2-trillion budget for the government's six-year infrastructure buildup will come from foreign loans.  

Amid the government's goal to raise infrastructure spending, Habito said it is important to maintain the country's stable and healthy debt level.

He said the country's public debt last year accounted for 40 percent of the gross domestic product (GDP).

Habito said the Philippines, debt-to-GDP ratio should remain at a healthy state.

"For as long as our debt does not grow beyond the growth of our economy, we are good," he said.

As of 2016, the country posted its lowest debt-to-GDP ratio level in 20 years at 42.1 percent from 44.7 percent in 2015. The national government’s outstanding debt as of 2016 reached P6.09 trillion.

A low debt-to-GDP ratio indicates that a country has sufficient resources to pay back its debts.

Habito said the country was able to lower down its debt level in the last 10 years.

Recently, there have been concerns whether the Philippines would be incurring unsustainable debt amid its infrastructure push and China’s launch of the Silk Road Initiative, which seeks to improve connectivity between Asia, Europe and Africa through infrastructure investment.

In a Forbes opinion piece, Corr Analytics founder Anders Corr has cautioned the Philippines might fall into “debt bondage” if the nation's infrastructure push will be fueled by high-interest rate loans from the most likely lender China.

Corr said the current Philippine national government debt of approximately $123 billion could rise to over a trillion US dollars in 10 year given China’s prevailing interest rates.

“The only way to stop such unjust debt is for the terms to be entirely transparent to the Philippine public in advance, for full cost-benefit analyses to be done by an independent authority on each deal, and for the Philippine Congress to vote on whether each deal proceeds. Failing that will lead to virtual Philippine debt bondage to China,” Corr said.

“At any likely interest rate, the Philippines will have trouble repaying $167 billion in debt, plus interest, to China. The Philippines will have to give political and economic concessions to China in order to repay annual interest, or renegotiate such a large quantity of debt,” Corr noted. (FREEMAN)

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