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Palace rejects proposal to defer foreign debt payments
He said one of the consequences are cross default provisions in a loan agreement that puts the borrower in default if the borrower defaults on another obligation.
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MANILA – Malacañang on Thursday thumbed down the proposal for the government to temporarily suspend the country’s debt payments to allocate more funds for the government’s coronavirus disease (Covid-19) response.
Presidential Spokesperson Harry Roque said the government is not considering the proposal of Senator Imee Marcos, saying it would cause more harm than good.
“Hindi po iyan option na kinokonsidera ng ating pamahalaan sa ngayon, dahil mas malaki po ang magiging repercussion niyan (That is not an option being considered by our government because it will cause bigger repercussions),” he said in a virtual presser.
He said one of the consequences are cross default provisions in a loan agreement that puts the borrower in default if the borrower defaults on another obligation.
“Kapag tayo ay nag-default sa isang pagkakautang natin, magdi-default po tayo sa lahat ng pagkakautang natin and mas madugo po ang mangyayari diyan kung lahat po ng ating pinagkakautangan ay sisingilin tayo sabay-sabay (If we have a default on one loan, we will have a default in all our loans and it will be harder for us if they charge us at the same time),” he said.
He said the government currently has enough funds to prevent further transmission of the highly-infectious disease.
Should the government lack funds, Roque echoed the idea of President Rodrigo Duterte to sell public properties if the government falls short of money that will be tapped to address the pandemic.
He, however, clarified that selling public property would only be done as a last resort.
In a separate statement, Finance Secretary Carlos Dominguez III rejected Marcos’ proposal, dismissing debt moratorium as “narrow sighted.”
“Debt moratorium has not crossed our mind. It was never entertained or will ever be a part of our crisis response measures,” he said.
Dominguez said the proposal could put at risk the country’s track record of regularly paying its loans to both local and foreign debtors as they are due.
“We have built a 34-year track record, beginning with the Cory Aquino administration, of honoring our country’s obligations. Honoring our word has allowed us to remain as one of the most attractive investment destinations and one of the world’s favorite bond issuers,” he said.
Marcos, chairman of the Senate Committee on Economic Affairs, called on the government to consider suspending loan payments to augment the social amelioration program for low-income families affected by the Luzon-wide enhanced community quarantine.
She said the budget for interest payments on the country’s debts in the General Appropriations Act of 2020 amount to PHP451 billion, which could be used for cash aid by the government under the Bayanihan Heal As One Act or Republic Act of 2020 or Republic Act No. 11469.
She noted that off-budget payments of PHP582 billion to amortize the principal amount can also be reserved for cash aid.
The Philippines plans to borrow some PHP310 billion (USD 6.1 billion) from the Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), World Bank and other sources.
As of 2019, total debt to gross domestic product (GDP) ratio stood at 44.2 percent, while the actual debt-to-GDP ratio which excluded guarantees was down to 41.5 percent.
