Foreign loans, grants for COVID-19 hit $8.2 billion

MANILA, Philippines — Foreign borrowings and grant assistance secured by the Philippine government for its anti-COVID-19 measures and to finance various projects reached $8.2 billion as of end-June, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno told reporters via Viber that foreign exchange inflows from the government borrowings would be used to bankroll the government’s response to the health crisis and to fund various projects particularly those pertaining to infrastructure.

Diokno said commercial borrowings amounting to $3.67 billion included the $2.35 billion global bond issuance in late April as well as the $1.32 billion from euro-denominated bonds offered to foreign investors in January.

The Philippines borrows heavily from both foreign and domestic creditors to plug the country’s widening budget deficit as it continues to spend more than the revenues it earns.

In terms of program loans for emergency COVID-19 response and various reform programs, Diokno said the government has borrowed $4.28 billion.

These include $1.51 billion for COVID-19 active response, $498.8 million for emergency COVID-19 response and development policy, $498.8 million for disaster risk management, $400 million to facilitate youth-to-school transition, $300 million for local governance reform, $299.3 million for social welfare development, $206.8 million for emergency assistance for the reconstruction of Marawi City, $100 million for social protection and $60 million for social protection support.

Likewise, the BSP chief said multilateral lending agencies have extended $254 million in project loans.

These covered $98.07 million from Japan International Cooperation Agency (JICA), $30.84 million from the International Bank for Reconstruction and Development (IBRD) of the World Bank, $11.15 million from the International Fund for Agriculture Development (IFAD), $1.57 million from the Asian Development Bank (ADB), and $113.07 million from other international lending agencies.

As of end-June, Diokno said the national government’s foreign exchange disbursements amounted to $6.27 billion.

Of the total amount, the BSP chief said $3.3 billion went to debt servicing, $2.92 billion was used for foreign exchange conversion, and $54 million went to other net disbursements.

“Debt servicing refers to payments of principal and interest on national government’s commercial borrowings, program loans, and project loans, while foreign exchange conversion refers to amounts withdrawn for conversion to pesos with the national government’s other counter parties,” Diokno said.

Diokno added other net disbursements include charges and disbursements of grants to other government agencies, net of interest income on the national government’s deposit.

In sum, Diokno said net national government receipts amounted to $1.93 billion as of end-June this year.

Latest data from the central bank showed the country’s external debt inched up by 1.2 percent to $81.42 billion in the first quarter of the year from $80.43 billion in the same quarter last year. Public sector external debt reached $45.1 billion and accounted for more than half or 55.4 percent of the country’s foreign debt, while private companies accounted for 44.6 percent or $40.8 billion.

Economic managers are now expecting a wider budget deficit of 8.4 percent of gross domestic product (GDP) instead of the original 3.2 percent of GDP as revenue collections would drop 16.7 percent and disbursements jump by 11.3 percent this year due to the pandemic.