Manila, Philippines – The Philippine government is borrowing more than it initially expected from countries like China, Japan, and South Korea, citing “good” interest rates for major infrastructure deals, said the Development Budget Coordination Committee (DBCC).
Budget Secretary Benjamin Diokno said the government decided to hike the share of foreign borrowings to 25% of the total financing program for the next 5 years, from the initial 20%.
“We have adjusted to 25 (foreign lenders):75 (local lenders) to allow us to borrow more,” Diokno, who also chairs the DBCC, told reporters during the DBCC press conference in Manila on Tuesday, April 24.
This was from the previous borrowing ratio of 20 (foreign lenders):80 (local lenders).
“We’re getting offers from China and Japan…. They’re giving us good rates. Korea is also making offers to us,” Diokno said, citing the loan the country got from the Japan International Cooperation Agency (JICA) for the Metro Manila Subway project.
Last March, Finance Secretary Carlos Dominguez III announced the signing of the first tranche of the loan agreement with JICA, amounting to ¥104.53 billion or P51.3 billion.
The loan carries an interest rate of 0.10% per annum for non-consulting services, and 0.01% per annum for consulting services, to be repaid within 40 years inclusive of a 12-year grace period.
JICA said the loan agreement will cover actual demand for funding for the initial years of the project.
“The subway, they’re offering us an interest rate of 0.1%, 12 years to pay. China will be somehow in the neighborhood of 2% interest rate per annum…. We are going to get the best terms possible,” Diokno told reporters.
While Japan gives lower interest rates than China, Socioeconomic Planning Secretary Ernesto Pernia had said that the government still needs financing from China as it cannot get funding solely from Japan.
“We cannot get all the loans from the ODA (official development assistance) of Japan. They have to give to other countries as well…. Between 2% and 3% interest rate is still much better than commercial loans,” Pernia was quoted as saying in an Interaksyon report.
The government plans to spend P8 trillion until 2020 to restore the country’s crumbling roads and bridges, glitch-ridden trains, as well as airports that seem to be behind the times.
To help fund the “ambitious” infrastructure program, the government passed a tax reform law partly aimed at contributing P180 billion to government coffers by 2020. This is aside from public-private partnership deals and a large chunk of loans that will come from China, Japan, and possibly South Korea.