PH’s COVID-19 loans, grants hit $6.508 billion

by Ben O. de Vera, Philippine Daily Inquirer, 9 Jun 2020

MANILA, Philippines — The loans and grants secured by the Philippines to finance COVID-19 response climbed to $6.508 billion (over P325 billion) to date after it signed a $750-million loan agreement with the Beijing-based Asian Infrastructure Investment Bank (AIIB).

In a statement Tuesday, the Department of Finance (DOF) said Secretary Carlos G. Dominguez III and AIIB acting director-general Rajat Misra on Friday last week signed the loan accord for the China-led multilateral lender’s share in its co-financing with the Asian Development Bank (ADB) of the Philippines’ $2.25 billion COVID-19 active response and expenditure support (Cares) program.

The AIIB loan maturing in 12 years (inclusive of a three-year grace period) will be fully disbursed within this month, DOF said.

“The loan package from the AIIB will help augment our funding requirements necessary to mitigate the severe negative impact of COVID-19 on our people and our economy. On behalf of the Philippine government, we thank the AIIB and [its] president Jin Liqun for committing with the ADB to support the Cares program, which will go a long way in helping our people get back on their feet, and our economy recover and emerge stronger after the crisis,” Dominguez said.

Prior to last week, DOF said it had borrowed $5.65 billion for budgetary support in the fight against COVID-19, on top of $8 million in grants and one project loan also aimed at addressing the pandemic’s health and socioeconomic fallout.

Among the loans secured as budgetary support financing were the Manila-based ADB’s counterpart $1.5 billion for the Cares program, $200-million social protection support project (second additional financing), and $400-million support to capital market-generated infrastructure financing (subprogram 1).

Also among the budgetary support loans were the Washington-based World Bank’s $500-million third disaster risk management development policy loan, $500-million emergency COVID-19 response development policy loan, and $200 million from its social welfare development and reform project 2 (additional financing) secured last year which had been realigned for COVID-19 response.

The Philippines’ $2.35 billion in US dollar-denominated global bonds, which fetched record-low coupons across two tenors when sold last April, will also be used for COVID-19 budgetary requirements.

In a report, DOF said $4.05 billion (more than P202 billion) of these budgetary support financing were already disbursed to the government.

National Treasurer Rosalia V. de Leon on Tuesday confirmed that these funds were already with the Bureau of the Treasury.

Besides loans supporting the COVID-19 budget, the World Bank had also approved a project loan—the $100-million COVID-19 emergency response project, to be spent on buying more medical supplies and setting up additional laboratories.

Also, the Philippines had received two grant assistance, both from the ADB worth $3 million for the COVID-19 emergency response project, and another $5 million for rapid emergency supplies provision.

The government was ramping up borrowings to better respond to the COVID-19 crisis, such that the national government’s outstanding debt will hit a record-high P9.589 trillion by yearend, equivalent to 49.8 percent of gross domestic product (GDP).

DOF and Treasury officials earlier told the Inquirer that the bulk or 75-76 percent of borrowings will be sourced locally, by issuing treasury bills and bonds to domestic investors mostly in the private sector.

World Bank senior economist Rong Qian told a virtual press conference Tuesday that a debt-to-GDP of 50 percent—the level projected in the next two years—was still a “good, safe” ratio allowing the government to borrow more.