An opposition leader in the House of Representatives on Tuesday allayed fears that the Philippines might get entangled in a foreign debt trap as the government embarks on a P8-trillion economic infrastructure spending binge to make up for a massive backlog.
“We do not see the [Philippine] government getting into a situation wherein it incurs too much external debt that suddenly becomes difficult or impossible to repay,” Lito Atienza, senior deputy minority leader, said on Independence Day.
Vice President Leni Robredo has warned that the Philippines might fall into a debt trap if the government borrows money indiscriminately, especially from China.
“We have no problem with borrowing money, regardless whether it is from Japan, China or South Korea, as long as the government spends the funds on sensible and beneficial projects,” Atienza said.
“If we are talking of infrastructures such as trains, expressways, and bridges—these will all help to provide new employment, enable goods and people to move faster at a lower cost, and further stimulate overall economic growth,” Atienza said.
He said growth, in turn, would translate to a larger economic asset from which government is bound to collect incremental tax income.
“Surely the administration will not obtain a project loan from a foreign government at a higher interest rate, if the same credit can be procured elsewhere at a lesser rate,” Atienza said.
“We are also counting on the National Economic Development Authority to rigorously screen and ascertain the feasibility of every project before it is approved for possible foreign funding,” Atienza said.
The Philippines and Japan signed in March the initial tranche of a ¥104.53 (P51.3 billion) loan for the first phase of the Metro Manila Subway Project.
The concessional loan from the Japan International Cooperation Agency (JICA) carries an annual interest rate of one-tenth of one percent, payable over 40 years.
The subway is the “biggest single project” under the P8-trillion program dubbed “Dutertenomics,” according to Finance Secretary Carlos Dominguez III.
Atienza, former Manila mayor, said he supports the subway project, saying “passenger trains are absolutely imperative to cope with the growing demand for high-capacity and rapid public transportation.”
“What we should avoid is a situation like the mothballed Bataan Nuclear Power Plant,” Atienza said.
The $2.3 billion that the Philippine government borrowed to build the 621-megawatt nuclear facility became the country’s single biggest debt obligation until it was fully repaid in 2007.
After the plant was completed, it was discarded by the government due to serious safety flaws.
The plant was constructed by America’s Westinghouse Electric Co. using money borrowed by the state-run National Power Corp. from the U.S. Export-Import Bank.