Economic managers earn lawmakers’ confidence – DoF
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Fri, 21 Dec 2018 17:33:30 +0000
Amid a row over the House of Representatives’ treatment of Budget Secretary Benjamin Diokno, the Finance department of Friday said that lawmakers had expressed confidence that economic managers would be able to manage the country’s debt.
In a statement on Friday, the department said that Senate Minority Leader Franklin Drilon recognized that the Philippines’ total debt was still within manageable levels.
“I have complete confidence in Secretary Sonny Dominguez that he will not mismanage our debt structure,” Drilon, who heads the minority bloc in the Senate, was quoted as saying.
He was said to have noted that for 2015, the country’s total debt was equivalent to 44.7 percent of gross domestic product (GDP), falling to 42.1 percent in 2016 and 2017, and hitting 42.3 percent as of September 2018.
This “is well within the acceptable standards of 60 percent of GDP as a limit of our foreign borrowings,” the senator added.
The Finance department also mentioned that Sen. Loren Legarda had echoed Drilon’s assessment by saying that the economic team had crafted a “medium-term debt management strategy …. that is fiscally sound, necessary and sustainable.”
“Let me just put into the record that debt-to-GDP ratio is the right metric rather than the absolute level of public debt. [At the] end of 2017, it was at a low of 42.1 percent and the projection by 2022 is that it will decline by 38.6 percent. I believe the rule of thumb of a country is to have a debt-to-GDP ratio below 60 percent, and that is covered by the present state of our debt-to-GDP ratio,” she said.
The Finance department also noted that Legarda had given assurances that safeguards have been put in place to ensure that China-funded projects were economically sound and the debts attached to them would not be mismanaged.
Drilon earlier raised concerns over financial contracts with China that were sealed without undergoing any public bidding and also pointed to warnings by the World Bank of a “Chinese debt trap,” the department noted.
“Legarda, however, made it clear that the projects under the ‘Build Build Build’ program and other development projects of the Duterte administration to be funded by China entail a rigorous vetting process by Beijing, which recommends three Chinese contractors of good standing per project to bid among themselves for the projects,” it continued.
Legarda was said to have agreed with Drilon that because the Chinese loans were dollar-denominated, the accompanying interest rate of about 2 percent was reasonable and offers the Philippines a stable currency rate as compared to the yen-denominated loans from Japan, which is also helping fund the infrastructure program.
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