MANILA -- Officials of the Department of Finance (DOF) on Wednesday allayed critics’ fears anew that the Philippines could fall into China’s debt trap saying the government never reneged on its debt obligations.
They made this assurance following concerns raised by Senior Associate Justice Antonio Carpio that China can seize patrimonial assets if the Philippines fails to pay the PHP3.69 billion loan extended by China to fund the Chico River Pump Irrigation Project.
Finance Undersecretary Bayani Agabin explained that Philippine laws, particularly Presidential Decree No. 1177, require automatic appropriation in the national budget for debt obligation.
“May probisyon tayo sa batas PD 1177 na automatikong naglalaan ng pambayad ng utang na nakapaloob po ito sa taunang General Appropriations Act (We have a provision in the law, PD 1177 that automatically appropriates payment for debt in the annual) General Appropriations Act. Meaning all our indebtedness -- it’s automatically appropriated in our budget,” Agabin said in a press briefing in Malacañang.
“Lahat ng mga nabanggit na probisyon sa loan agreement ay mangyayari lamang kung ang gobyerno ng Pilipinas ay hindi na makabayad ng utang nito (All the provisions in the loan agreement will only happen if the government of the Philippines fails to pay its debts),” he added.
Agabin challenged critics of the Chinese loan agreements to review the Philippines credit history and consult with experts before jumping into conclusions that the country is in danger of falling into China’s debt trap.
Moreover, he said none of the foreign loan agreements include the surrender of Philippine assets to the lender country.
Agabin reiterated that the Philippines did not offer any of its natural resources as collateral in securing the Chico River Pump Irrigation Project.
“Ang waiver of sovereign immunity ay hindi nagpapahintulot sa sinumang dayuhan o foreign party na kunin o angkinin ang ating mga likas na yaman. (The waiver of sovereign immunity does not allow any foreign party to claim our natural resources),” Agabin said.
The Chico River irrigation project aims to provide a stable supply of water to around 8,700 hectares of agricultural land in the provinces of Kalinga and Cagayan.
Finance Undersecretary Mark Dennis Joven also rejected concerns that the Philippines will fall into China’s debt trap the same way Sri Lanka did, stressing the Philippines does a better job in managing foreign loans.
“We’re very well aware of what is happening in the world and we’re fiscally responsible enough not to do something which will endanger the fiscal position of our country,” Joven said.
In 2017, China took ownership and control of Sri Lanka’s two major ports after the latter failed to pay back loans.
Joven said the Philippines failure to pay China is least likely because the Philippines has a smaller debt to gross domestic product (GDP) of around 40 percent compared to Sri Lanka’s debt to GDP of around 80 percent.
“Philippines is, in terms of all the countries in the world, I think we’re at around top 40 of most debt solvent countries in the world. In terms of possibility of failure to pay or over leverage, it’s very, very unlikely,” Joven said. (PNA)