THE Philippines will not fall into a debt trap despite the billions in loans it wants to get from China, Socioeconomic Planning Secretary Ernesto Pernia said Thursday.
Responding to former President Benigno Aquino III, who warned the present administration to be more careful in seeking loans with China—Pernia said that there shouldn’t be cause for any concern yet.
“Well, we haven’t yet signed any loan agreement with China except oral commitments or some written memoranda of understanding and we certainly are going to be very careful with our dealings in terms of project financing from the Chinese government,” Pernia said in a Palace news briefing.
Pernia said both sides have clearing mechanisms in place to ensure that such projects are undertaken by “internationally reputable firms” with no bad track record.
“We want the Chinese side to certify to us that the companies, private or state-owned enterprises that will be involved in projects, will be truly competent and with impeccable integrity. That’s on the Chinese side. So they can submit three names,” Pernia said.
“On the Philippine side, we also have a clearing mechanism to pick one of the three recommendees from the Chinese side. So that is the best we can do to ensure that we are not going to get into problems,” he said.
Pernia did not mention the interest on any of the loans from Beijing.
The Investment Coordination Committee of the National Economic and Development Authority was earlier designated as the clearing house for proposed investments from China.
The Philippines plans to spend P8.2 trillion or about $167 billion on infrastructure projects may sink the country deeper into debt, mostly through foreign loans funded through China’s Belt and Road initiative.
“Dutertenomics, fueled by expensive loans from China, will put the Philippines into virtual debt bondage if allowed to proceed,” said Anders Corr, founder of Corr analytics.
Corr said that the fund that will be used for the Duterte administration’s infrastructure program will bring the total national government debt of the Philippines from $123 billion to $290 billion or P14.4 trillion.
While economic managers said that most of the 30 big-ticket projects would likely be funded by taxes, the Palace earlier said that China’s loan offers may be complemented with a 10- and 15-percent interest rate for debt repayment.
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