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Foreign debt fuels Philippines growth – DoF
The Philippines has maintained its solid fiscal position by guaranteeing that the government can always afford to pay its foreign borrowings, according to Finance Secretary Carlos Dominguez 3rd.
Dominguez was quoted as saying in a statement released by the Department of Finance on Wednesday that foreign borrowings have proven to be an efficient tool for driving economic growth and ensuring rapid finance for emergencies, such as the present coronavirus disease 2019 (Covid-19) problem.
Government borrowings used for productive investments like infrastructure projects that drive growth and create jobs, rather than a burden, are good for economic development, he added.
Foreign borrowings to help fund the country’s unanticipated Covid-19 response were also effectively spent, the Finance chief continued, to offer emergency assistance to vulnerable families and other pandemic-affected sectors of the economy, strengthen the country’s health care capacity, keep the economy afloat, and promote its speedy recovery.
He added the Philippines was able to reduce borrowing costs through good fiscal management, as seen by the ratio of debt interest payments to expenditures, which fell to 9.5 percent in 2019 from 13.9 percent before the current administration took office in 2016.
Dominguez also mentioned that the ratio of debt interest payments to revenue has reduced dramatically from 14.7 percent in 2015 to only 11.5 percent in 2019.
Citing data from its International Finance Group, the Finance department said the Philippines’ outstanding external debt is just 25.2 percent of gross national income, which includes all income made by a country’s people and businesses, indicating that the country is well-positioned to service foreign debt in the medium to long term.
In terms of gross international reserves (GIR) as a percentage of total external debt, the Philippines has consistently performed in line with the region’s average, excluding high-income countries, Dominguez also emphasized.
The Philippines’ GIR was $110.12 billion at the end of 2020, easily covering its short-term debt 7.8 times over.
“Moreover, external repayments can be easily met, given the sustained healthy level of GIR at 15.6 times the country’s debt service burden in 2020,” Dominguez said.
This sound and prudent management of the country’s GIR, he added, protects the government’s ability to fulfill its external debt commitments and absorb shocks during any crisis.
“Sound and prudent reserve management also creates a level of confidence in markets that the Philippines can meet its external obligations. This high level of confidence is reflected in the Philippines’ high credit ratings, which has remained unchanged amid the series of rating downgrades and negative rating outlooks in 2020 as a result of the global economic upheaval triggered by the Covid-19 pandemic,” Dominguez pointed out.
Source: https://www.manilatimes.net/2021/05/20/business/business-top/foreign-debt-fuels-ph-growth-dof/874144/