Finance Secretary Carlos Dominguez III has said some sectors that have continued to raise the false spectre of the Philippines defaulting on its concessional loans to China have no faith in their own country.
Dominguez said fears of the Philippines defaulting on any of its loans are unfounded, given that the government has never failed to pay its debts even during the worst of times.
“The Philippines has never, never defaulted on its loans. The Philippines has not done it even in the worst time and the worst time was right after Marcos,” Dominguez said in a recent interview with reporters.
He said that even when the Philippines was cash-strapped, it had never defaulted on any of its loans, recalling that the country paid its obligations on the $2.2 billion Bataan Nuclear Power Plant project despite it turning out to be a “white elephant.”
“The Philippines has no history of defaulting on its loans. So why are people saying now that we will default? They have no faith in the Philippines? I don’t know why people are saying ‘There might be a default.’ That means to say those people have no faith in their own country,” Dominguez stressed.
Dominguez also said there is no collateral involved in the loans that the government has entered into with any country as he invited the public to examine the terms of all the loan accords that the Philippines has signed with its development partners, which are available for viewing at the Department of Finance (DOF) website, www.dof.gov.ph.
Even lawmakers have dismissed concerns about the Philippines defaulting on its loans and China seizing the country’s public assets, with Senate Minority Leader Franklin Drilon pointing out that this will never happen, given that Presidential Decree 1177 mandates the automatic appropriations for debt servicing, which means the Philippines will always have to pay its debts.
Dominguez earlier reassured the public that the Philippines will not fall into a “debt trap” to any country as the government expands its infrastructure investments through concessional loan financing from its development partners in the region.
He also reiterated that in conformity with the Constitution and our laws, none of the pipeline projects funded with official development assistance (ODA) from countries like Japan and China allow for the appropriation or takeover of domestic assets in the event of failure to pay, which is unlikely.
The government’s borrowing program, Dominguez noted, remains “very conservative in the sense that we only borrow to invest in projects that will generate economic gains which are greater than the borrowing cost.”
According to Dominguez, no infrastructure project is funded through ODA without going through a rigorous system of reviews and approvals by the Cabinet and the President, and unless there is certainty that the project is economically viable and highly beneficial for the Filipino people.
Dominguez said the government’s debt is carefully structured to ensure that it does not borrow without raising its own capital for infrastructure projects, while at the same time sourcing a significant portion of financing from the local debt market to minimize exposure to adverse external factors.
He said that as of 2018, the government’s project debt exposure was only 0.66 percent to China and 9 percent to Japan in relation to the total debt.
By 2022, when most of the financing for the “Build, Build, Build” program will have been accessed, the country’s project debt to China will account for 4.5 percent, while that of Japan’s will be twice as large at 9.5 percent of the total debt. DOF