Dominguez: “Unequivocal” no to debt moratorium, PH to honor obligations through COVID-19 crisis

April 15, 2020
Carlos Dominguez III
Finance Secretary Carlos Dominguez III

FINANCE Secretary Carlos Dominguez III has emphatically stated that the Philippines “has not and will not consider a moratorium on the national government’s debt obligations despite the 2019 coronavirus (COVID-19) pandemic.

"Debt moratorium has not crossed our mind. It was never entertained or will ever be a part of our crisis response measures," Dominguez said.

The Finance chief made the statement in reaction to what he called “narrow-sighted” suggestions that the Philippines request for a moratorium on debt payment to its creditors and use such interest payments in the national budget to partly fund the country’s COVID-19 response.

“The strongest pillar of the Philippines’ standing in the global economic community is that the country honors its financial obligations–and, for that reason, investor confidence in our economy is broad and deep. Integral to our country’s remarkable turnaround story is how credible and responsible a borrower it has become since 1986.  Back then, our total debt-to-GDP (gross domestic product) ratio hit as high as 78.3 percent. By 1991, this ratio had gone down to 65.2 percent.”

The Philippines’ total debt-to-GDP ratio stood at 44.2 percent in 2019, the product of decades of sound fiscal stewardship across administrations, and President Duterte’s resolve to remain conservative with our finances and in our approach to debt management, for the benefit of the present and future generations of Filipinos. Actual debt-to-GDP ratio, which excludes guarantees, was down to 41.5 percent in 2019.

Dominguez explained that the country “cannot wish away our obligations at this critical time when the reliability of our word secures our economy's capacity to bounce back once the COVID-19 pandemic is over. More favorable options are available for financing our emergency and recovery programs. If we lose our credibility among international lenders, we will lose our ability to access low-interest, concessional financing for our recovery and stimulus programs."

“For this reason, a moratorium was never considered or entertained as a tool to address COVID-19. The country’s fundamentals are strong, and the willingness of investors and creditors to partner with the Philippines means we can negotiate new loans from a position of strength," he added.

In response to Senator Imee Marcos’s suggestion that the Philippines use interest payments in the national budget for COVID-19 response programs, Dominguez said “the figure Senator Marcos cites includes debt servicing for loans from domestic creditors, including pensioners and small depositors. Around two-thirds of our debts are from local creditors.” Senior citizen pensioners, for instance, rely on their investments in government debt instruments for their income."

“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. Rather than take an option that will tank our long-term investment and borrowing prospects, we should burnish our reputation as a borrower and a business partner with integrity and palabra de honor because this ultimately benefits the Filipino people.” Dominguez said.

“In the developing world, we are among the few countries able to borrow from multilateral institutions at largely concessional rates.”

Dominguez earlier said the country has been working with multilateral institutions such as the Asian Development Bank (ADB), the World Bank, and the Asian Infrastructure Investment Bank (AIIB) for additional financing for its 4-pillar strategy against COVID-19.

He added that the country’s strong fundamentals and commitment to fiscal and economic reforms has given it credibility with domestic and international lenders.

“Very few economies of our size can ask for better terms," he said. "The global community is happy to lend to us because we do not renege on our commitments.”

“Under President Duterte’s watch, we continue to borrow wisely, we tax more equitably and efficiently, and we continue to spend such resources judiciously. Confidence in the Philippines during a time when investors are scouring investment destinations for the strongest prospects is an exceptional advantage that we cannot squander.”

“The Philippines will honor its commitments. We will face the challenges of defeating COVID-19, and fulfill our obligations. The world can count on this country’s recovery and on the continued strength of its word. There is no asset more valuable than dependability in a time of global uncertainty,” the Finance chief said.