Dr. Jose P. Tabbada and Dr. Arturo G. Pacho (University of the Philippines)
Under the Duterte administration, foreign borrowing, particularly from the People’s Republic of China, has become a favored economic growth strategy. The issue that this preference for Chinese loans has raised, and which this paper also raises and tries to answer, is whether the strategy is sustainable. A debt is sustainable if the benefits of the project to which the loan proceeds are applied exceed the cost of borrowing.
To determine whether the debts incurred by the Duterte administration are sustainable, some of the loan agreements signed by and between the Philippines and China will be examined for provisions in the agreement that are onerous, one-sided in favor of the lender, and/or disadvantageous to the borrower. The terms and conditions of the Chinese loans will also be compared with those of other sources in order to determine which sources offer better terms for the Philippines and ensure that no one source is unduly favored. Finally, the experience of other countries which have earlier borrowed from China will be discussed; from such experiences, lessons and policy recommendations will be drawn to enhance debt sustainability in the Philippines.
public finance and the good life
taxation; debt sustainability; mobilization of domestic resources; government expenditures; remittances for development; etc.