The Department of Finance (DOF) has obtained a total of $17.06 billion (about P815 billion) in affordable financing from external sources in 2020 for key infrastructure projects and other priority programs, and for helping bridge the wider fiscal deficit incurred last year because of the huge state spending on the coronavirus disease 2019 (Covid-19) response measures.
Spearheaded by its International Finance Group (IFG), the DOF secured $7.73 billion or 45.3 percent of this amount from multilateral lenders, $2.86 billion (16.7 percent) from the Philippines’ bilateral partners, and $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 3rd.
“Out of the total external financing contracted in 2020, around $15.44 billion is for the emergency requirements for our Covid-19 response, while the remaining $1.62 billion is for other initiatives including ‘Build, Build, Build’ infrastructure projects,” said Joven, who heads the DOF-IFG.
Joven said $14.52 billion in budget support financing was contracted by the DOF in 2020 to help cover the deficit of P1.38 trillion ($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.
He said the remaining amount of $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.
Of the $14.52 billion, a total of $8.05 billion was in the form of official development assistance (ODA) financing and another $6.47 billion was from funds raised in the overseas bond markets, he said.
The amount of $12.18 billion out of the $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,” he said.
In securing financing from external sources, Joven said the DOF has always maintained “its bias towards cheaper and multilateral 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 added.
Aside from loans, the IFG also processed grants and technical assistance amounting to $859.53 million last year, of which $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 (PPE), ventilators, face shields, and others, from China,” Joven said.
Also, the $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 added.
For 2021, Joven said the IFG is targeting to secure a total of $23.71 billion in financing from external sources to bridge the budget deficit and provide funds for priority projects.
Of this amount, $8.06 billion (34 percent) will be contracted for budget support purposes, while $15.65 billion (66 percent) will be for project financing.
“We are planning to source a total of $7.67 billion in loans and grants from multilateral institutions, $10.54 billion from our bilateral partners; and raise $5.5 billion from the commercial markets this year,” Joven said