Business organizations are starting to worry about the repercussions of the flood projects scandal that has engulfed the government.

The scandal, which is worse than the P10-billion pork barrel scam, will have a negative impact on the country’s credit rating since it involves the fiscal situation of the yearly budget.

Deprioritizing ODA financing could lead to higher borrowing costs, delayed infrastructure projects and reduced investor confidence, all of which could negatively impact the credit rating.

Davao City Rep. Sid Ungab recently revealed that counterpart financing to unlock concessional loans was blanked in 2024 and slashed by a substantial amount in this year’s budget to create space for legislators’ pet projects that are sources of kickbacks and commissions.

The deprioritization of Official Development Assistance (ODA) financing in the budget could have significant implications for the country’s credit rating, warned George Barcelon, president of the Philippine Chamber of Commerce and Industry (PCCI).

The ODA consists of loans or grants from foreign governments and multilateral institutions that promote sustainable social and economic development.

These funds often come with low interest rates and long repayment periods, making them ideal for financing infrastructure and development projects.

Deprioritizing the ODA could force the Philippines to rely on more expensive commercial borrowing, increasing debt servicing costs and potentially straining fiscal sustainability, according to a banking official.

Higher borrowing costs could signal fiscal stress, which credit rating agencies like Moody’s, S&P, and Fitch may view negatively, potentially leading to a downgrade or negative outlook.

The ODA is heavily utilized for infrastructure projects, which are critical for economic growth and competitiveness. The 2024 ODA Portfolio Review highlighted the challenges in implementing large infrastructure projects, but also noted their alignment with the Philippine Development Plan 2023–2028 and Sustainable Development Goals.

Reducing the ODA could delay or cancel key projects, slowing economic growth and undermining investor confidence.

A weaker growth outlook could lead credit rating agencies to reassess the country’s economic strength. Reducing the ODA could damage the Philippines’ credibility with international investors and partners.

The suspension of a loan from one country could tarnish the country’s reputation, triggering a chain reaction that may eventually deprive the country of cheap loans, making it harder to secure future ODA or Foreign Direct Investment.

A perceived lack of commitment to international partnerships or the mismanagement of concessional funds could lead to a negative perception among creditors.

Replacing the ODA with commercial loans would exacerbate the debt burden, as commercial loans typically have higher interest rates and shorter maturities. This shift could increase the country’s debt-to-GDP ratio, a key metric monitored by credit rating agencies.