Public sector foreign loans dip 48% in Q1

The Monetary Board, the central bank's policy-making body, has approved $2.87 billion worth of public sector foreign borrowings in the first quarter this year, 48 percent lower compared to same period in 2023 of $5.56 billion.

In a statement Monday, April 15, the Bangko Sentral ng Pilipinas (BSP) said the Monetary Board approved seven official development assistance or ODA loans. These are five program loans amounting to $2.02 billion and two project loans worth $850 million. Project loans are usually infrastructure-related while program loans are financing for general government purposes.

The BSP said these borrowings will fund the National Government’s (NG) projects on infrastructure, which represent the $850-million loan component.

Program loans involve policy reforms, including health care worth $910 million and digital transformation of $410 million. It also includes a tax administration loan amounting to $400 million and a loan to fund inclusive finance development worth $300 million.

Last year, the BSP approved 14 medium to long-term loans worth $14.49 billion of public sector foreign borrowings, higher by 40.4 percent compared to $10.32 billion in 2022.

These include the following: two bond issuances worth $4 billion; 12 project loans worth $5.67 billion; and 10 program loans amounting to $4.82 billion.

Public sector borrowings need to be reviewed and approved by the Monetary Board to make sure foreign debt level continues to be manageable.

The review and approval process is part of the BSP mandate to assess all public sector or government foreign borrowings under Section 20, Article VII of the 1987 Philippine Constitution.

The BSP reiterated that it “promotes the judicious use of the resources and ensures that external debt requirements are at manageable levels, to support external debt sustainability.”

As of end-2023, the country has total external debt of $125.4 billion, up 12.7 percent from end-2022’s $111.3 billion.

Public sector external debt increased by 5.6 percent to $77.8 billion in the fourth quarter of 2023 from the previous quarter’s $73.7 billion level. This was about 62.1 percent of total debt.

The BSP said the growth in public sector borrowings was due to the following: a $2.1 billion net availments by NG (national government); the net acquisition of public sector debt securities by non-residents from residents of $930 million; and positive foreign exchange revaluation worth $898 million.

About 91.2 percent or $71 billion of public sector obligations were NG borrowings. The remaining 8.8 percent or $6.8 billion were borrowings of governmentstock owned and controlled corporations, government financial institutions and the BSP.

Meanwhile, the country’s major creditor countries were: Japan with $15.6 billion of total loans; China with $4.7 billion; and the United Kingdom with $4.2 billion.

The Philippines borrowed $33.1 billion from official or multilateral sources last year, and also borrowed $15.2 billion from bilateral creditors. Combined, borrowings from official sources accounted for 38.5 percent of total external debt.

Borrowings in the form of bonds and notes accounted for 32.7 percent or $40.9 billion while obligations to foreign banks and other financial institutions accounted for 22.9 percent or about $28.7 billion.