MANILA – Budget secretary Benjamin Diokno dismissed the notion that the Philippines will fall into a debt trap as “fake news.”
The speculations were supposedly due to the government’s reliance on foreign borrowing to finance its ambitious infrastructure program.
“The fear that we might fall into debt trap, that’s also another … I call it fake news,” Diokno told reporters during a breakfast forum in Manila.
He made the remark amid criticisms that the government’s inclination to borrow more from China undermines the Philippine sovereignty and increase dependence to Beijing.
The country’s debt as a percentage of the economy is “in pretty good shape” at around 40 percent, Diokno noted.
“Our debt now is around P7 trillion. Our GDP (gross domestic product) is in the neighborhood of P19 to P20 trillion, so we’re in very good shape,” he said. “If your debt-to-GDP ratio is 60 percent or lower, you’re in pretty good shape. You can still borrow money,” Diokno noted.
The national government debt rose to P7.016 trillion as of end-June, up 2.7 percent or P183.62 billion from the previous month, due to the issuance of domestic retail bonds and the depreciation of the peso.
Apart from a modest debt-to-GDP ratio, Diokno said the government also follows a certain threshold in borrowing money.
“Unlike other countries, we don’t borrow money until it passes some threshold. Our threshold right now is a rate of return of 10 percent.”
“Any project which will give us a rate of return of 10 percent, which is much higher than the cost of borrowing, then it’s a go,” he said.
The government has adopted a 75-25 borrowing mix in favor of local sources to fund the deficit from ramped up infrastructure spending.
Under the “Build, Build, Build” program, the government plans to spend over P8 trillion until 2022, largely funded by tax revenue. (GMA News)
