'No faith in country': Finance chief hits critics fearing default on China loans


Posted at Apr 02 2019 06:05 PM | Updated as of Apr 02 2019 07:49 PM

MANILA (UPDATE) - The Philippines has never defaulted on its loans and those who keep raising such possibility have no faith in their country, Finance Secretary Carlos Dominguez said Tuesday. 

Dominguez said in a statement that the government has always dutifully paid its debts. 

 “The Philippines has never, never defaulted on its loans. The Philippines has not done it even in the worst time and the worst time was right after Marcos,” Dominguez said. 

The Finance chief made the remark amid controversy over Chinese loans for the Chico River Irrigation and Kaliwa Dam projects.

Supreme Court Associate Justice Antonio Carpio had earlier warned China could seize the country's gas in the Reed Bank if it is unable to pay its US$62-million loan for the Chico River Pump Irrigation Project. 

Dominguez, however, insisted that even when the Philippines was strapped for cash, it had never defaulted on any of its loans.

“The Philippines has no history of defaulting on its loans. So why are people saying now that we will default? They have no faith in the Philippines? I don’t know why people are saying ‘There might be a default.’ That means to say those people have no faith in their own country,” Dominguez said.

He also said there was no collateral involved in loan agreements the government has entered into with any country and reiterated that the Philippines will not fall into a "debt trap." 

Carpio, for his part, rejected Dominguez' assurance that there is nothing to worry about regarding the loan agreement for the Chico River project.

In a text message to reporters, Carpio said that a provision in the loan agreement considers suspension of repayment as an "event of default."

"Under Article 7.1(6) of the Chico River loan agreement, there is an 'event of default' when 'the borrower stops or suspends repayment to its creditors generally," he said.

He reminded Dominguez that "in 1983, the Philippines declared a moratorium on its foreign debt repayments because the Central Bank did not have sufficient foreign exchange to service its foreign debts."

"So, it is not correct to say that the Philippines never defaulted on its debt because the mere suspension of repayment, like declaring a debt moratorium, is already an 'event of default,'" he explained.

As of 2018, the government’s debt exposure to China was only 0.66 percent of its total debt, while the Japanese debts were at 9 percent. 

By 2022, the country’s debt to China will account for 4.5 percent of its total debt, while that to Japan’s will be at 9.5 percent, the Department of Finance said. 

- with a report from Mike Navallo, ABS-CBN News