CLARK FREEPORT ZONE, Pampanga — Department of Finance dismissed claims the Philippine government is falling into a “debt trap” by tapping Chinese and Japanese financing for its strategic infrastructure projects.
“This is totally unfounded. The financing we availed of are soft loans at the lowest possible interest rates and the longest possible term arrangements,” Secretary Carlos Dominguez III told reporters at the sidelines of the Sulong Pilipinas 2018 Philippine Development Forum in Clark.
Dominguez added that estimated project debt to China will only constitute 0.65 percent of the government’s total debt from the current 0.11 percent.
Meanwhile, project debt to Japan will increase from the current 3.17% to 8.90% of the total debt at the end of the year.
“By 2022, when most of the financing for the Build Build Build program should have been accessed, our project debt to China will constitute around 4.5% of the total debt, while the project debt to Japan will be around twice as large at 9.5% of total debt. So there is no danger of us being drowned by Chinese debt,” Dominguez clarified.
He also assured the public that the government borrows with great prudence, aware that it is the taxpayer who ultimately pays for the debt.
“We always keep in mind that the money we borrow come from the taxes dutifully paid by the people of the countries that have continued to generously support us. Thus, we make sure that the funds we borrow are wisely used and will produce sufficient economic benefits to make the debt service easier down the road,” he said.
Dominguez also stressed that all projects are approved by the National Economic and Development Authority Board without any interference from the Chinese.
He added that for Chinese funded projects, the government asked China to submit three names as bidders for their project so in case the bidders don’t perform well, they are also accountable to their government.
In closing, Dominguez said this is one way the Duterte administration is protecting the Philippines from projects that are unnecessary and are driven by agencies outside of the Philippines.