Lenders have offered to defer debt payments for\nthose severely affected by the lockdown. The World Bank has encouraged the\nGroup of 20 nations to postpone repayment of official bilateral credit, although\nhas not yet considered suspending debt payments owed it. The International\nMonetary Fund has approved debt relief to its 25 poorest member countries. Commercial\nbanks have offered a 60-day grace period for loans, including for household\ndebts borrowed through credit cards. Even informal moneylenders in the\nPhilippines\u2019 urban poor communities have reportedly stopped collecting loan\ninstallments for a while. <\/p>\n\n\n\n
These are not necessarily all done out of\nsheer goodwill. In many cases they seek to stop debtors from succumbing to\nsevere debt-driven crisis due to the pandemic which would stop them from paying\nanything at all in the future. In short, they are also favorable to the\ncreditors.<\/p>\n\n\n\n
The Duterte government, with its much-brandished\ngood credit standing, could have moved for debt relief too but instead, at the\nheight of the COVID-19 pandemic, it started borrowing more. The finance\ndepartment underscores the need for government to borrow from foreign sources\nto fund its economic recovery plan. Multilateral and country creditors have unsurprisingly\nexploited the situation and recycled funds to lend. <\/p>\n\n\n\n
Do we really need to borrow for COVID\nresponse? People have asked. How are we going to pay for all of these debts?<\/p>\n\n\n\n
Accumulating debt<\/strong><\/p>\n\n\n\n The Duterte administration\u2019s Philippine\nProgram for Recovery with Equity and Solidarity (PH-PROGRESO) is worth Php1.7\ntrillion, Php561 billion (US$11 billion) of which is targeted by the Department\nof Finance (DOF) to come from bilateral and multilateral loans and global\nbonds. There is another Php404 million (US$8 million) in foreign grants.<\/p>\n\n\n\n From March 14 to June 4 this year, based on\nIBON monitoring, the Duterte government has already obtained foreign\ncommitments of US$3.95 billion in loans, US$17.3 million in grants, and US$5\nmillion in technical assistance (TA) \u2013 all for addressing the COVID-19\npandemic. The Philippine-headquartered Asian Development Bank (ADB) accounts\nfor US$2.1 billion of the loans plus all of the TA and much of the grants. The\nWorld Bank accounts for US$1.1 billion, and the China-led Asian Infrastructure\nInvestment Bank (AIIB) for US$750 million. There are US$9.3 million in grants\nfrom USAID. In sum, there are 7 project loans, 2 grants, and 1 regional TA so\nfar. <\/p>\n\n\n\n Loans amounting to US$3.95 billion are, at the\ncurrent exchange rate of Php50.05 to a US dollar, equivalent to Php197.7\nbillion. This increased the outstanding national government debt which has already\nrisen from Php7.7 trillion by the end of 2019 to an astounding Php8.6 trillion\nby April 2020. The Php869-billion increment in the last four months far\nsurpasses the full-year increments of the last three years.<\/p>\n\n\n\n Government securities increased by Php436\nbillion, while the Bangko Sentral ng Pilipinas used its repurchase facility to lend\nPhp300 billion to the national government for COVID response. Meanwhile, external\ndebt increased by Php133.1 billion from December 2019 to April 2020. In April\n2020, the Duterte government\u2019s foreign debt grew 16.5% year-to-date and 16.4% year-on-year,\nor the biggest increase in the last four years.<\/p>\n\n\n\n The Duterte government has already reached 66%\n(or Php919.5 billion) of its Php1.4 trillion projected gross borrowings for the\nyear. If the planned foreign financing for PH-PROGRESO alone is realized, the government\nwould already go over its borrowing projection. This does not yet include the uncontrollable\nincrease in domestic debt due to the continuous issuance of government\nsecurities. Domestic debt comprises 68% of the outstanding national government\ndebt.<\/p>\n\n\n\n For whose sake, really?<\/strong><\/p>\n\n\n\n The loan commitments are specified for\nstrengthening healthcare, augmenting funds for socioeconomic relief, and providing\neconomic stimulus for agriculture and micro, small and medium enterprises\n(MSMEs). There are also wage subsidies for small enterprises and support for\nrepatriated overseas Filipino workers (OFWs).<\/p>\n\n\n\n These are urgent things to attend to during the\npandemic that the Duterte government has not competently addressed. Instead, we\nhave only witnessed how government\u2019s policy of health privatization, neglect of\nessential economic sectors, and myopic understanding of the poor have made it ill-prepared\nfor an emergency such as COVID. <\/p>\n\n\n\n COVID-19 is unplanned thus the need to apply\nfor a loan \u2013 that has been the official line. Are the loans meant to help us\ncope with the coronavirus, while government opts to keep spending for its\nneoliberal policies and to protect business? \nActually, these urgent loan-financed items are part of a larger package\nwhich includes even bigger support for businesses who get financial relief in\nthe form of tax deferrals, low-interest loans, and credit guarantee schemes. <\/p>\n\n\n\n The country\u2019s creditors are more straightforward.\nThey will provide budgetary support so that the country\u2019s economic managers can\ncontinue spending on the administration\u2019s Build,\nBuild, Build<\/em> (BBB) infrastructure projects, foreign investment attractions,\ntourism and other boosters of the otherwise slowing, and now contracting,\neconomy. <\/p>\n\n\n\n The ADB has pledged US$1.5 billion from its COVID-19\nActive Response and Expenditure Support (CARES) program for fiscal management,\namong others. The AIIB\u2019s US$750 million loan is co-financed with CARES. The\nAIIB only has loan facilities for infrastructure investment and does not have a\n\u2018development financing\u2019 orientation. It recently launched a COVID recovery\nfacility but even this is oriented towards addressing liquidity problems, providing\nfiscal and budgetary support in partnership with multilateral banks, and building\nhealth infrastructure \u2013 all so that governments can focus on COVID impacts and\nleave infrastructure funds alone.<\/p>\n\n\n\n The more recent Php400 million loan commitment\nof the ADB to strengthen domestic capital markets and investments is more explicit.\nThis is to enable the Duterte government to fund infrastructure at lower costs and\nto enable the private sector to raise infrastructure funds from capital markets.<\/p>\n\n\n\n COVID-19 is unplanned, while the Duterte\nadministration\u2019s focus is unchanged. The government is still fixated on burnishing\nthe economy\u2019s image to attract foreign investors, and will only address the emergency\nby as much as it can borrow. This reinforces the country\u2019s vicious spiral of\ndebt and shallow economic growth. Creditors are complicit in this neoliberal\nCOVID response.<\/p>\n\n\n\n Protecting profits<\/strong><\/p>\n\n\n\n But what really demolishes the argument that\ngovernment needs to take out a loan for COVID-19 is that there are viable\nsources of money that government chooses to forego in behalf of big business. Case\nin point is the DOF-backed Corporate\nRecovery and Tax Incentives for Enterprises (CREATE) bill, the renamed second\npackage of the unpopular Tax Reform for Acceleration and Inclusion (TRAIN) Law.\nThe first package taxes consumption goods by the poor and relieves the rich of\npaying income taxes. CREATE in turn reduces corporate income tax from 30% to\n25% from July 2020 until 2022 and\nthereafter 1% yearly cut until 20% by 2027. This gives corporations up to Php667\nbillion worth of tax breaks over the next five years, which is the largest in\nthe country\u2019s history. <\/p>\n\n\n\n CREATE is at the\ncore of the administration\u2019s recovery plan, PH-PROGRESO. It also proposes Php133.7\nbillion in loans and guarantees, Php142.8 billion in other tax cuts and\nforegone revenue, and Php233.3 billion in additional liquidity. PH-PROGRESO declares\nprioritizing the resumption of BBB. To do so, it incentivizes big business with\ntax cuts and liquidity and equity infusion through government intervention and\nborrowing in the guise of helping them recover from the pandemic recession. The\ncreation of jobs and recovery of incomes of the poor and vulnerable are an\nafterthought.<\/p>\n\n\n\n Indeed, government has to revive the economy\nfrom the unnecessary lockdown, but this has to start with what is truly\nessential. The COVID crisis is an extraordinary opportunity for government to strengthen\nnational production in agriculture and industry \u2013 a surefire way to stimulate\nemployment and consumption. But agriculture and the MSMEs that make up the\nmajority of the country\u2019s enterprises are extremely marginalized. <\/p>\n\n\n\n In the House-approved Php1.3 trillion Accelerated\nRecovery and Investments Stimulus for the Economy (ARISE) bill, agriculture\ngets a paltry Php66 billion and MSMEs are allocated only Php125 billion in\nloans and guarantees. The COVID crisis is also a golden chance to bridge the chasm\nbetween rich and poor, which has become stark especially during COVID. But quite\nto the contrary the Duterte government has relieved the rich and increased\nborrowing to sustain such economic order \u2013 an addition to the mounting burden\nof the poor.<\/p>\n\n\n\n Unpayable future<\/strong><\/p>\n\n\n\n The DOF reiterates that the debt is payable\nand that the country is in no way headed to a debt crisis. It says that the\ndebt-to-gross domestic product (GDP) ratio is only around 39.6% at the end of\n2019 and 43.3% as of March 2020. The ratio indicates manageable levels, says the\ngovernment, and is much less than in 2000-2010 when the debt-to-GDP ratio hovered\naround an annual average of 60% until it started going down in 2011 at the start\nof the country\u2019s high growth episode.<\/p>\n\n\n\n But those days are gone. Fast economic growth\npeaked in 2012-2016 then steadily declined since the start of the Duterte\npresidency. Before COVID, the administration tried to but could not cover up\nthe slowing economy. The GDP growth slowed from 6.9% in 2016, 6.7% in 2017,\n6.2% in 2018, and to just 6.0% in 2019, the slowest in eight years. The economy\nshrank in the first quarter of 2020 by 0.2%, and the economic managers are seeing\na severe decline in full-year real GDP growth to -0.6% to 4.3 percent.<\/p>\n\n\n\n All the sources of economic growth that government\nhas relied on \u2013 OFW remittances and foreign direct investment in BPOs and export\nmanufacturing \u2013 have slowed down since the beginning of the Duterte\nadministration. And these are definitely headed into a tailspin as the global\neconomy sinks deeper into crisis.<\/p>\n\n\n\n The Duterte government has never considered the\nerosion of agriculture and manufacturing to arrest the economic slowdown. Instead,\nit has artificially boosted economic growth with pump-priming \u2013 increasing\ngovernment spending to its highest level as percent of GDP. Infrastructure\nspending comprised 4.7% of the GDP in 2019 and is targeted to reach 7.0% of the\nGDP by 2022. It shall be the highest among all the administrations.<\/p>\n\n\n\n BBB projects are the Duterte administration\u2019s preferred\ndrug for resuscitating the ailing economy before it slips away. However, it has\nbeen borrowing heavily for this. Of the Php4.3 trillion needed for the 100 flagship\ninfrastructure projects of the administration, 83% is expected to come from\nofficial development assistance (ODA), mostly in the form of loans. The Duterte\ngovernment\u2019s borrowing binge is unprecedented \u2013 on a monthly average, it is\nborrowing Php45.6 billion, almost three times as much as Aquino (Php19.0\nbillion) and over twice as much as Arroyo (Php21.2 billion).<\/p>\n\n\n\n The fiscal deficit is thus a growing problem,\nwith the Php660.2 billion deficit in 2019 equivalent to 3.5% of GDP. The fiscal\ndeficit is already at Php348 billion as of April 2020.<\/p>\n\n\n\n Here is why the debt is eventually unpayable\nand such a huge burden. First of all, ODA loans may be at concessional rates but\nare tied to the conditionality of using the technology, materials and expertise\nof the creditor country. In the case of China, this includes even the use of\nChinese labor. Secondly, absorptive capacity in a program as grand as BBB is a\nmajor issue. The Philippine government lacks the bureaucratic and technical\ncapacity to implement all the grand infrastructure projects. This capacity has\nbeen eroded by decades of privatization and deregulation. The private sector,\non the other hand, is not that deep because of the economy\u2019s backward fundamentals.\nThird, BBB\u2019s main focus is mobility for the benefit of the service and trading\noriented economy, and not in building Philippine agriculture and industry. Thus\nthe infusion of infrastructure capital or even the construction of the facility\nwill not be useful in the long run for national development.<\/p>\n\n\n\n Lastly and most ironically, we are being obliged\nto fully pay for this mounting debt. This early, the government is already\nthinking of taxing and raising government fees on the very coping mechanisms of\nthe dislocated working people. For instance, the economic managers want to tax online\nselling even as people are losing their sources of livelihood, or want to\ncollect bike registration fees as workers seek alternatives to the poor public mass\ntransport, among others. The government already failed to meet its revenue\ntarget in 2019, short by Php12.2 billion, and is anticipating even bigger\nspending and bigger debt in 2020.<\/p>\n\n\n\n Our future is being mortgaged. It doesn\u2019t help\nto cure apprehensions when government says that the debt is manageable. Government\nhas to end its anti-people neoliberal economic policies, and only then shall we\nbe well.<\/p>","protected":false},"excerpt":{"rendered":" The finance department underscores the need for government to borrow from foreign sources to fund its economic recovery plan. Multilateral and country creditors have unsurprisingly exploited the situation and recycled funds to lend. But do we really need to borrow for COVID-19 response? How are we going to pay for all of these debts?<\/p>","protected":false},"author":10,"featured_media":9807,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-withbanner.php","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[2048,3],"tags":[2199,2218,978,2288,347,2290,1704,2184,2183,116],"class_list":["post-9805","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banner","category-features","tag-covid-19","tag-covid-19-response","tag-debt","tag-debt-payments","tag-duterte-administration","tag-fiscal-deficit","tag-loans","tag-national-government-outstanding-debt","tag-philippine-debt","tag-philippine-economy","wpautop"],"acf":[],"publishpress_future_action":{"enabled":false,"date":"2026-07-23 16:49:40","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/comments?post=9805"}],"version-history":[{"count":1,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9805\/revisions"}],"predecessor-version":[{"id":9806,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9805\/revisions\/9806"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media\/9807"}],"wp:attachment":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media?parent=9805"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/categories?post=9805"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/tags?post=9805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}