The central bank has approved a large batch of fo­reign loans meant to help fund the government’s fight against the coronavirus pandemic, but the regulator was quick to point out that the country’s debt profile remains favorable despite the borrowing spree.

In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the policy making Monetary Board had given the green light to a total of $5.6 billion worth of concessional credit from overseas as of the end of July 2020.

These borrowings are a $2.6-billion loan from Asian Development Bank, a $1.5-billion loan from World Bank, a $750-million loan from Asian Infrastructure and Investment Bank, a $477-million loan from Japan International Cooperation Agency and a $295-million loan from Agence Francaise de Developpement.

“We would like to assure the public that the impact of these borrowings on key metrics is manageable and sustai­nable,” he said, explaining that the low interest rates and long tenors extended by the creditors are favorable.

In addition, the central bank chief noted that the Philippines’ external debt and external debt-to-gross domestic product ratio remain one of the lowest in Asia and its credit rating peers.

“This fact is recognized by international credit ratings agencies [like] Moody’s, Fitch and Standard and Poor’s,” he said. “From January to June 2020 these rating agencies downgraded the ratings of 39 sovereigns and revised to negative outlook 101 sovereigns.” “By contrast, they affirmed their investment grade rating for the Philippines,” Diokno added. “That’s a strong vote of confidence in the country’s ability to service its debt moving forward.” The BSP governor also described the country’s foreign debt profile as “robust,” noting that 83.6 percent of borrowings are medium- to long-term, while being balanced between public sector with 55.4 percent of total borrowings, and the private sector with 44.6 percent.

Meanwhile, 57.8 percent of medium- to long-term borro­wings have fixed interest rates, minimizing risks from possible interest rate hikes.

BSP data showed that the country’s external debt stood at $81.4 billion at end-March 2020, down by $2.2 billion from the $83.6 billion recorded in December 2019.

The external debt figure at the end of the first quarter of 2020 represented 21.4 percent of the country’s gross domestic product—substantially lower than the 57.3 percent recorded 15 years earlier.

Diokno earlier reiterated that the Philippine economy conti­nues to have the capability to pay off its loans as they come due, despite the fresh round of borro­wings done in recent months, in view of the country’s improved external debt manageability “achieved through 20 years of critical structural reforms.” “Along with sound economic management, reforms involving industry and foreign exchange liberalization, tax and debt management, and the financial sector have helped strengthen the regulatory environment and the economy’s capacity to absorb shocks,” he added.


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