Duterte's 'build, build, build' won't place PH in debt trap: Diokno

Katrina Domingo, ABS-CBN News

Posted at May 19 2017 01:15 PM | Updated as of May 19 2017 01:44 PM

President Rodrigo Duterte. Reuters

The Philippines will not fall into a "debt trap" even as President Rodrigo Duterte managed to secure at least $18 billion worth of infrastructure loans from China and Japan for his "Build, Build, Build program", Budget Secretary Benjamin Diokno said Friday.

"Don't be scared to borrow money... Ang golden rule diyan is if the return of investment is higher than the cost of borrowing, go na 'yan. Hindi na pinag-iisipan 'yan," Diokno said in an interview on radio DZMM.

Diokno said the loans will not fund stale projects that cannot generate income. 

"Kung 'yung pera (na inutang) ay gagamitin mo lang pampataas ng suweldo, hindi talaga tama yun. Pero if you are going to use the money to invest in a project that would pay for itself, malaking bagay yun," he said.

"Dapat maingat lang tayo kung saan natin ilalagay... We will be prudent sa pagsingil namin. We will make sure the funds will pay for itself," he added.

Duterte's "Build, Build, Build" program is an ambitious infrastructure development plan that will require some P8 trillion in infrastructure spending, mostly to be sourced from the national budget but will also need a huge foreign component.

In a Forbes opinion piece, Corr Analytics founder Anders Corr has warned that the Philippines might fall into "debt bondage" if the Southeast Asian’s infrastructure push will be fueled by high-interest rate loans from China, the most likely lender. 

Corr said, given China’s prevailing interest rates, the current Philippine national government debt of approximately $123 billion could rise to over a trillion US dollars in 10 years.

Diokno said he is confident that the country can pay off its loans as the government would only borrow under favorable interest rates to "make sure that our debt will be manageable and sustainable."

"Utang 'yan pero hindi yan ganun kamahalan. Siguro between to 3-5 percent (interest) lang," the budget secretary said.

The budget chief said the Philippine debt is still in the safe zone as the country's economy is projected to "outgrow" its financial liabilities in the coming years.

"Ang debt to GDP (gross domestic product) ratio natin ngayon ay 40 percent. If you fall below the 60 percent ay okay ka pa," Diokno said.

"Sa aming pag-aaral yung 40 percent natin ay bababa pa ng 35 percent kasi mas bibilis pa ang ating mga ekonomiya dahil sa mga proyektong ito," he added.

Trade Secretary Ramon Lopez earlier noted that only 20 percent of the total budget for the Philippines’ infrastructure program under Duterte will come from loans.