By Carlos H. Conde
International Herald Tribune
Published: February 20, 2008
MANILA: The Philippine government has decided to stop borrowing money from abroad for new infrastructure and development projects, opting instead to finance them locally.
As a result of the decision, which was first announced by President Gloria Macapagal Arroyo on Tuesday, financing for at least 11 pending government projects costing more than $2.5 billion in total will not come from so-called official development assistance, as had been planned. Such aid comes in the form of loans from other governments or from multilateral donor agencies with relatively easy payment terms.
The policy change will affect only projects whose official development assistance financing agreements had not been completed, Ignacio Bunye, Arroyo’s press secretary, said Wednesday. “All foreign borrowings are going to stop,” he said in an interview.
Bunye said that the Philippines could afford to raise funds locally and that the government’s fiscal position has improved over the years. Manila has carried out reforms that have won praise from the International Monetary Fund and the World Bank and intends to balance its budget by next year. The government announced this week that it had paid $2.75 billion in foreign debt ahead of schedule.
“The rationale for the new policy was the president’s social payback scheme,” Bunye said. “We have to use the fruits of these fiscal reforms for infrastructure. There’s no reason to borrow foreign funds when we have the money now.”
A half-billion-dollar project to give more classrooms Internet access will be affected by the change in policy, as will a planned extension of Manila’s light-rail transit system. Bunye said new financing arrangements for each of the projects affected would be made case by case.
The Philippines has relied heavily on official development assistance for the development of its infrastructure and services, with Japan, the United States and, lately, China having provided most of the financing. The Asian Development Bank has lent the country more than $8 billion since 1966.
Last week, the Philippine Center for Investigative Journalism, which conducted a six-month review of 71 official development assistance-financed projects, found that “the sharp surge in assistance in recent years has not only sparked scandals and allegations of corruption, but threatens to drag Filipino taxpayers deeper in debt.” It said 7 out of 10 such projects “have failed to deliver their touted benefits and results.”
As of October last year, Manila’s foreign debt was 1.589 trillion pesos, or $39 billion, according to the Bureau of the Treasury. More than 30 percent of the national budget for this year is allocated to interest payments.
