By Victoria “NIKE” De Dios
Cognizant of the widening fiscal deficit due to the huge spending being done by the government on COVID-19 response measures, the Department of Finance (DOF) has contracted a total of US$17.06 billion in affordable financing from external sources in 2020 for key infrastructure projects and other priority programs.
Spearheaded by its International Finance Group (IFG), the DOF secured US$7.73 billion or 45.3 percent of this amount from multilateral lenders, US$2.86 billion (16.7 percent) from the Philippines’ bilateral partners, and US$6.47 billion (37.9 percent) from the commercial markets.
The continued provision last year of program loans from the Philippines’ bilateral and multilateral partners is “a testament to the timely delivery of our key sectoral reforms,” said Finance Undersecretary Mark Dennis Joven in his report to Finance Secretary Carlos Dominguez III.
“Out of the total external financing contracted in 2020, around US$15.44 billion is for the emergency requirements for our COVID-19 response, while the remaining US$1.62 billion is for other initiatives including ‘Build, Build, Build’ infrastructure projects,” said Joven, who heads the DOF-IFG.
In his report to Dominguez, Joven said US$14.52 billion in budget support financing was contracted by the DOF in 2020 to help cover the deficit of P1.38 trillion (US$27.81 billion or 7.6 percent of GDP or gross domestic product) resulting from the expected reduced collections of revenue agencies and the massive spending requirements of COVID-19 response programs.
The remaining amount of US$2.54 billion in project loans was successfully negotiated by the IFG in 2020 to support the government’s key projects that will be implemented over several years starting in 2020, Joven said.
Of the US$14.52 billion, a total of US$8.05 billion was in the form of Official Development Assistance (ODA) financing and another US$6.47 billion was from funds raised in the overseas bond markets, Joven said.
The amount of US$12.18 billion out of this US$14.52 billion was already disbursed as of end-December 2020, he added.
“Because of a higher emergency funding requirement in light of COVID-19, the amount of external financing contracted in 2020 increased by 75.43 percent year-on-year. This also represents an overall 33-percent expansion of the external borrowing program from 2016 to 2020,” Joven said.
Joven said that in securing financing from external sources, the DOF has always maintained “its bias towards cheaper and multilalateral loans.”
“The government has consistently availed debt for budget support, recognizing that program loans and global bonds provide more flexibility in terms of utilization,” he said.
Aside from loans, the IFG also processed grants and technical assistance amounting to US$859.53 million last year, of which US$26.74 million is intended for COVID-19 response.
“In 2020, the IFG also facilitated the provision of various donations, such as testing kits, masks, personal protective equipment (PPEs), ventilators, face shields, and others, from China,” Joven said.
Also, the US$77.38 million Agreement on Economic and Technical Cooperation that the DOF signed recently with the China International Development Cooperation Agency (CIDCA) may be fully or partially used for the government’s COVID-19 response programs subject to discussions with the Chinese government, he said.
For 2021, Joven said the IFG is targeting to secure a total of US$23.71 billion in financing from external sources to bridge the budget deficit and provide funds for priority projects.
Of this amount, US$8.06 billion (34 percent) will be contracted for budget support purposes, while US$15.65 billion (66 percent) will be for project financing.
“We are planning to source a total of US$7.67 billion in loans and grants from multilateral institutions, US$10.54 billion from our bilateral partners; and raise US$5.5 billion from the commercial markets this year,” Joven said.