DOF insists Philippines never defaulted on foreign debt in 1983

MANILA, Philippines — The Philippines did not default on its foreign debt in 1983 because its lenders agreed to extend the repayment period, the Department of Finance said Wednesday. 

Supreme Court Senior Associate Justice Antonio Carpio has warned that China could seize the Philippines' patrimonial assets, including gas reserves in Recto (Reed) Bank, if the administration fails to repay the loan for the $62-million Chico River pump irrigation project.

Finance officials have given assurances that the Philippines could pay its debts, adding that the country never defaulted on its financial obligations. Carpio, however, disputed the claim, saying the Philippines declared a moratorium on its foreign debt repayments in 1983 because the central bank did not have enough foreign exchange to pay its foreign debts. 

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But Finance Assistant Secretary Antonio Lambino II said the 1983 moratorium was not a default because the Philippines was given more time to settle its debts. 

"My understanding of the moratorium back in ’83 is that it was agreed with the banks. So, since there was agreement and it was not a unilateral decision, the view is that, it was really not a default," Lambino said in a press briefing. 

Lambino said the Philippines was able to pay its debts because of the adjusted repayment schedule.

He said the Philippines would default on its debt "if we decided not to pay or if we decided for whatever reason that we couldn’t pay and stop paying."
     
"There was an extension of the repayment period so that the payments would be smaller over time but this was the most difficult time also in terms of our economy. We were not doing well at that time but even then the decision was to have an agreement with the lenders," the finance official added. 

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Lambino maintained that the country can settle its debts, noting that its economic growth is outpacing the growth of its debt. To ensure that the government has enough funds, finance officials promised to improve the tax collection efficiency and to strengthen the drive against tax evaders. 

The Finance department also expressed readiness to comply with Duterte's directive to review all government contracts, an order that also covers projects funded by China loans. 

“I do not want to preempt the review but of course, we will follow the orders of the President,” Lambino said when asked whether his agency was confident the loans would stand scrutiny.

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