Unending cycle: PH loans series

9T

PHILIPPINE’S TOTAL DEBT

COVID-19 Special Issue Volume 40, Issue 4

rundowns

UNENDING CYCLE

PH Loan Series

Amiel Rose AQUINO

It is indeed true wars are very expensive, and in order to win a war we need a lot of money—a lot of it. The COVID-19 pandemic brought so many nations down their knees, leaving economies to bleed; the Philippines is not an exemption.

In order to sustain financial support to battle this pandemic, donations were given, as well as series of domestic and global loans were granted:

MARCH 23, 2020

The Treasury received a ₱300 billion credit line via a bond repurchase deal by the Bangko Sentral ng Pilipinas. Given that a bond repurchase was made, The Treasury must pay it back with more money in a shorter time.

MARCH 18, 2020

To fund local relief efforts, the World Bank granted a $100 million loan line (about ₱5 billion).

MARCH 15, 2020

To initially help respond to the coronavirus outbreak, the Asian Development Bank (ADB) allowed a $3-million grant (about ₱150 million). Succeeded by the declaration of Metro Manila under community quarantine; strict measures along with curfew hours were imposed.

MARCH 26, 2020

President Rodrigo Duterte was given additional powers to realign the funds under the 2019 and 2020 budget for three months as the Republic Act 11469 or the Bayanihan to heal as one takes effect. Philippines was also declared under state of national emergency.

MAY 7, 2020

The United States government added another ₱298 million to the coronavirus response fund, providing ₱768 million (about $15.2 million) to our COVID-19 response budget.

APRIL 9, 2020

As the number of cases arises Finance Secretary Carlos Dominguez III admits that this year’s economy will foresee “zero growth” and may even contract. Another $5.6 billion (about ₱280 billion) from the World Bank and ADB, three folds higher than the original borrowing plan capped at ₱100 billion.

APRIL 10, 2020

Another $500 million (about ₱25 billion) loan was given by the World Bank.

APRIL 28, 2020

The Treasury raised $2.35 billion (about ₱119 billion) by offering 10- and 25-year dollar bonds to global investors, which will be paid with low interest.

APRIL 27, 2020

Additional $200 million (about ₱10 billion) was granted again by the ADB to continue layout the government’s emergency cash aid to poor Filipino households.

APRIL 24, 2020

Another loan granted by the ADB was a $1.5 billion (about ₱76 billion) loan to further strengthen our COVID-19 response programs.

MAY 15, 2020

In order to subsidize the second tranche of cash aid release under the Social Amelioration Program, President Duterte asks Congress’ to help to find additional funds.

MAY 29, 2020

The China-led Asian Infrastructure Investment Bank approves another $750 million (about ₱38 billion) loan, under specific conditions. The World Bank again also approves a new $500 million (about ₱25 billion) credit line.

JUNE 29, 2020

Two loan agreements were agreed upon between Philippines and the Agence Francaise de Developpement (AFD) amounting ₱14B to fund the Build, Build, Build Program and to help revive the economy from the pandemic aftermath. Taxes are the main source of funds in every nation. As our list of loans becomes longer, the years to pay it becomes longer. In the long run this debt may take a toll in the following years with the following implications.

JUNE 17, 2020

The first COVID-19 loan from a bilateral partner was granted by Japan International Cooperation Agency (JICA). A new ₱23.5 billion Japan loan was given to support hiring of contact tracers, maximize testing and among other anti-pandemic projects.

MAY 31, 2020

Government borrowings for COVID-19 response reaches $4.858 billion (about ₱246 billion) as of mid-May.

MAY 29, 2020

The China-led Asian Infrastructure Investment Bank approves another $750 million (about ₱38 billion) loan, under specific conditions.

HIGHER TAXES EVERYWHERE

In order to pay the country’s loans in full and in allotted time, Filipinos are looking towards a future with higher taxes everywhere. Lawmakers are finding ways to boost and generate funds to help revive our economy. Their particular interest—the Digital Market.

Last May 19, 2020, Congressman Joey Salceda filed House Bill No. 6765 or the Digital Economy Taxation Act, which aims to collect tax on digital services such as those offered by Facebook, Google, Netflix and Spotify as well as for digital retailers like those on the Lazada and Shopee. "[These] companies are making a killing because of isolation but are not paying enough taxes," Salceda discusses. With this bill it could generate an estimated 29.1 billion pesos (nearly $573 million) annually and help the country recover from the impact of the virus.

Additionally, Sen. Ramon “Bong” Revilla Jr. filed Senate Resolution No. 410 which backs up Salceda’s proposed imposition by including those who make a living in online streaming and such jobs alike.

HIGH UNEMPLOYMENT RATE

An increase in tax always opt to boost economic revenue and induce employment but if not carefully analyzed increase in tax might complicate economic growth and result in mass unemployment.

As taxes become higher small business owners will most likely struggle. Many businesses will close henceforth, a decrease in jobs for our workers.

OTHER COLLATERALS

Most of our borrowings greatly rely upon Chinese money. These grants however, apply special conditions which are not publicly stated. In the following years, the interests will continue to grow and we can’t comply with the allotted period, we are looking towards other means to pay it back.

Numerous people are concerned with the so-called "Chinese debt trap,” recalling Sri Lanka’s experience, which was forced to lease its Hambantota port to Chinese operators in order to cope with its debt to Beijing.