MANILA, Philippines — Foreign borrowings approved by the Bangko Sentral ng Pilipinas (BSP) declined for the second straight year, as the Philippines continues to recover from the impact of the COVID-19 pandemic.
Latest data from the central bank showed approved foreign borrowings declined by 21.4 percent to $10.32 billion last year from $13.14 billion in 2021.
The decline was traced to lower bond issuances, as well as the significant drop in program loans.
Bond issuances by the national government in the offshore market decreased by 22.5 percent to $4.77 billion last year from $6.16 billion in 2021. The Philippines tapped the offshore bond market thrice in 2022.
Likewise, program loans from multilateral lenders plunged by 77.5 percent to $870 million in 2022 from $3.88 billion in 2021.
On the other hand, project loans jumped by 51 percent to $4.68 billion from $3.1 billion.
For 2022, the BSP approved a total of seven project loans and three program loans.
According to the BSP, the bulk of the foreign borrowings last year at 46.2 percent or $4.77 billion was used to fund the national government’s general financing requirements.
About 35.2 percent or $3.63 billion bankrolled transportation projects, while 13.1 percent or $1.35 billion financed the government’s COVID-19 response projects and programs.
The remaining 5.5 percent or $570 million funded other infrastructure development projects.
For the fourth quarter alone, foreign borrowings approved by the BSP fell by 33 percent to $2 billion from $2.98 billion in the same quarter in 2021.
From October to December last year, the central bank approved one public sector foreign borrowing of $2 billion for the general financing requirement of the national government.
All foreign loans to be contracted or guaranteed by the government need prior BSP approval under Section 20, Article VII of the 1987 Constitution.
Likewise, all foreign borrowing proposals by the national government, government agencies and government financial institutions have to be submitted for approval-in-principle by the BSP before commencement of actual negotiations, as mandated by the Letter of Instruction 158 issued in January 1974.
According to the BSP, it promotes the judicious use of resources and ensures that external debt requirements are at manageable levels to support external debt sustainability.
In 2021, foreign borrowings approved by the BSP declined by 26 percent to $13.1 billion from $17.7 billion in 2020.
The Philippines borrows heavily from foreign and domestic creditors to finance the country’s budget deficit, as it spends more than what it actually earns. The country’s budget shortfall ballooned as the pandemic-induced recession pulled down revenue collections, while spending soared to finance COVID-19 response measures.
The country’s budget shortfall narrowed by 3.7 percent to P123.9 billion from January to November last year compared to P128.7 billion in the same period in 2021.
The Cabinet-level Development Budget Coordination Committee aims to reduce the share of the budget deficit to national output as measured by the gross domestic product to 6.1 percent in 2023 and 5.1 percent in 2024 from the projected 6.9 percent in 2022.