MANILA – Finance officials on Saturday made the assurance that the Philippines would never fall into China’s infamous debt trap, brushing off concerns that Manila might end up surrendering its prized resources if it defaults on loans from Beijing.
In a media forum in Quezon City, Finance Assistant Secretary Antonio Lambino said interest rates of the Philippines’ loans from China, which are primarily for infrastructure projects, range from only 2 to 3 percent.
That is considerably small, he said, compared to gains Filipinos stand to get once the infrastructure projects finish, as they are seen to give the country better transportation systems and wider business centers in the near future.
“Ang atin pong istratehiya ay talagang pagandahin ang ating (Our strategy is to really improve our) infrastructure program for logistics, for productivity, for efficiency not only because it’s good for the economy, it’s also because it’s good for the Filipino families,” said Lambino.
According to Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo, the Philippines has about $980 million in loans from China as of the end of 2018.
Critics have said the Philippines has entered into onerous deals with China, with Supreme Court Senior Associate Justice Antonio Carpio warning that Beijing could seize natural gas deposits in the Reed Bank (Recto Bank) if Manila is unable to pay the US$62-million Chinese loan for the Chico River Irrigation Loan Agreement.
Carpio also flagged the Philippines’ loan agreement with China for the Kaliwa Dam project, saying it also offers the country’s patrimonial assets as collateral.
But Guinigundo expressed confidence that the Philippines’ external debt, totaling $79 billion, is “very, very manageable,” citing the country’s good credit rating.
S&P Global on April 30 raised the Philippines’ score to BBB+, one notch below the minimum “A” rating over the country’s above-average economic growth, a healthy external position and sustainable public finances.
“Our credit rating captures the essence of our economic reality…and what kind of management capacity can we show to the world,” said Guinigundo. “On the basis of these, we have experienced periodic, successive, and continuous upgrade since 2012 and 2013.”
The official assured that there is no collateral and commitment of national patrimony to support the loans.
“All I can say is that on the basis of those loans contracted, there is no collaterals there and if there are issues between two parties, including the Philippines, all of these are subject to arbitration,” he said.
Guinigundo noted that President Rodrigo Duterte is doing “sensible economic management” on how he deals with China with regards to the unresolved dispute over the South China Sea.