THE Philippines is not in danger of falling into a debt trap, according to the Department of Budget and Management, in light of fears raised by economists after President Rodrigo Duterte was able to secure $18 billion in loans from China and Japan.
The money will be used by the Duterte administration to fund its infrastructure program.
“They have a great confidence that we can pay our debts,” Budget Secretary Benjamin Diokno said in a radio interview on Friday.
“If the return on investment is higher than the cost of borrowing, that’s a go. It’s a no-brainer,” Diokno said.
There is nothing wrong with borrowing for as long as the money is used in a project that would pay for itself, the Cabinet official noted. “We will make sure the funds will pay for itself,” Diokno said.
The amount of debt being incurred by the Philippines is still safe as the economy is expected to grow in the coming years.
“Our debt-to-gross domestic product ratio is currently 40 percent. If you fall below the 60 percent, you are still okay,” the Cabinet official said.
“Based on our studies, that 40 percent will drop to 35 percent because our economy is projected to grow because of the projects,” Diokno said.
The “Build, Build, Build” component of the Dutertenomics program consists of spending P8.4 trillion on infrastructure until 2022, when the Duterte administration ends its six-year term.
Philippine output grew by 6.4 percent in the first quarter of the year, from 6.8 percent a year earlier, according to the statistics office. It was the slowest in more than a year, since the economy grew by 6.3 percent in the fourth quarter of 2015.