THE Philippines signed on Wednesday a loan for 50 billion yen (around P23.5 billion) with Japan to add supplement its resources as it struggles to contain coronavirus disease 2019 (COVID-19).
During the signing ceremony on Wednesday, Finance Secretary Carlos G. Dominguez III said the loan, coursed through the Japan International Cooperation Agency (JICA), will add to funding for the pandemic-containment effort.
Japanese Ambassador to the Philippines Koji Haneda said the Philippines is “the very first recipient of this highly concessional loan” which falls under a Japanese program to assist countries in responding to the pandemic.
The loan comes with a 0.01% fixed interest rate and is payable over 15 years, including a 4-year grace period. It does not require policy conditions prior to release and will be disbursed immediately once the agreement takes effect, according to Mr. Dominguez.
The loan was co-financed by the Asian Development through its COVID-19 Active Response and Expenditure Support Program.
“We cannot understate the importance of this particular emergency support loan. As you may know, our deficit-to-GDP (gross domestic product) ratio will more than double this year as tax collections are down even as the government spends more to beef up our health care system and to provide relief to families, workers and other sectors hardest hit by the pandemic. We also need to fund our economic recovery program,” Mr. Dominguez said.
Aside from the loan, Mr. Haneda said the Japanese government will also extend two billion yen in grant aid for the country to buy several hospitals’ worth of medical equipment and to establish laboratories all over the country.
Japan is the country’s biggest development partner according to Undersecretary Mark Dennis Y.C. Joven.
Mr. Joven said the Japanese government has lent a total of 625 billion yen to the Philippines during the Duterte administration, accounting for almost half of the Philippines’ total official development assistance (ODA) portfolio.
In 2020, he said loans from Japan have totaled 158.46 billion yen, while grants amounted to 3.137 billion yen.
Mr. Joven said the government is looking to borrow around $8.6 billion in ODA from its development partners this year to add to its resources in dealing with the pandemic.
He said the government has gained access to nearly $5 billion so far.
As of June 4, the government has raised $6.508 billion for its COVID-19 response from foreign creditos via loans, including ODA, bond issues and grants.
Mr. Dominguez said domestic creditors will remain the largest source of financing with foreign lending capped at 25%.
As of June 24, the government has raised a net P1.2 trillion from domestic borrowing, while the budget deficit is projected to hit 8.4% of GDP this year.
Debt is projected to rise to 49.8% of GDP this year from a record low of 39.6% in 2019.
The government’s pandemic expenses have totaled P374.89 billion this year, counting from the allotment releases issued by the Budget department.
The biggest allocations went to the Department of Social Welfare and Development and the Department of Finance as the main implementing agencies of the government’s subsidy programs. — Beatrice M. Laforga