The Bangko Sentral ng Pilipinas (BSP) approved last year a lower amount of total foreign borrowings by the national government worth P13.68 billion, down from P14.49 billion in 2023.

In a report released last Friday, BSP said the approved amount declined by 5.56 percent and was used to implement 21 government projects and programs.

In the fourth quarter, the BSP approved six proposals for medium- to long-term foreign loans worth P3.21 billion, a decrease of 3.35 percent from the level in 2023.

The total external loans last year included two bond issuances amounting to $4.50 billion, 11 project loans worth $5.32 billion, and eight program loans worth $3.86 billion.

The biggest portion of P4.5 billion, or 32.89 percent of the loans, was used for general financing, while 31.79 percent, or P4.35 billion, was used for infrastructure.

Another substantial portion of P2.98 billion, or 22 percent, was used for policy reforms, environmental protection, and climate resilience projects and programs.

Education and healthcare projects were allotted $1.36 billion, or 9.94 percent, while agrarian reform and maritime safety projects received $490 million, or 3.59 percent.

According to Section 20 of Article VII in the 1987 Constitution, the BSP must assess and approve proposals for foreign loans by the national government prior to loan negotiations to ensure the state's financial integrity.

"The Bangko Sentral ng Pilipinas promotes the judicious use of the resources and ensures that external debt requirements are at manageable levels to support external debt sustainability," BSP said.

Department of Finance (DoF) Secretary Ralph Recto said the government aims to minimize foreign borrowings to 20 percent of the total loans, stressing inflationary effects on payments from foreign exchange movements.

Last week, the DoF announced the issuance of triple-tranche Global Fixed Rate Bonds consisting of 10-year and 25-year US bonds and 7-year Euro bonds.

The DoF said proceeds from the last two bonds will be used for environmental and other sustainability projects.

Recto said the government is taking a "gradual" approach in reducing its debt-to-GDP (gross domestic product) ratio from 60.6 percent last year to 56 percent by 2028.

National Economic and Development Authority Secretary Arsenio Balisacan said the investments in policies, infrastructure, and climate action will attract more businesses to the country, leading to easier access to cheaper interest rates.

"By being able to achieve and continue our progress in sustaining growth and improving our governance and institutions, we enhance the creditworthiness of the country by way of credit upgrades. So, you get the same rate as before because you are a good borrower and it's just like being there as a concessional loan borrower," he said.

Concessional loans are offered by governments and bilateral and multilateral institutions and require low to nearly zero interest rates over long periods of repayment.