Infrastructure loans 'not a bad thing': China-led bank economist

ABS-CBN News

Posted at Mar 14 2019 11:04 AM | Updated as of Mar 14 2019 11:12 AM

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MANILA -- Borrowing overseas to fund a massive infrastructure overhaul is "not a bad thing by itself," an economist from the a China led multilateral lender said Thursday.

Governments and officials around the world are growing increasingly wary over loans from China, which they said could sink poor nations into a debt trap.

"Philippines is embarking on a large infrastructure spending program, inadvertently you’ll suffer a small current account deficit, and require some external borrowing. This is not a bad thing by itself," said Jan Ping Thia, principal economist at the Asian Infrastructure Investment Development Bank or AIIB.

This picture taken on September 30, 2016 shows a general view of traffic as Manila's financial district is seen in the background. Philippine President Rodrigo Duterte has tapped a China-backed multilateral lender to help fund his government's "unprecedented infrastructure buildup", the finance minister said December 19, 2016, as he seeks closer relations with Beijing. The Beijing-based Asian Infrastructure Investment Bank (AIIB) has been viewed by some as a rival to the World Bank and the Philippines-based Asian Development Bank (ADB).  AFP PHOTO / NOEL CELIS

"We need to select high quality projects that give financial and economic returns to the country and that is the fundamental basis of their sustainability," he told ANC's Market Edge.

Beijing based AIIB is seen as a rival to the World Bank based in Washington and the Asian Development Bank led by Japan and based in Manila.

A supportive macroeconomic framework, a flexible exchange rate and long-term financing can help borrowers avoid short term risks, Thia said.

Fast-growing economies such as the Philippines should be spending at least 7 percent of its gross domestic product on infrastructure, he said.