The national government is exploring various offshore funding options as the Philippines prepares to transition to upper middle-income country (UMIC) status, which will eventually end its access to concessional loans.
As the Philippines becomes less reliant on official development assistance (ODA) loans upon graduating to UMIC status, the national government aims to maintain its strong track record of reliable access to foreign currency-denominated market financing, according to the Development Budget Coordination Committee’s Fiscal Risk Statement for 2025.
The document said once the Philippines becomes a UMIC, the country will no longer qualify for concessional loans offering low interest rates and extended repayment terms after a designated grace period.
According to the document, some of the offshore financing options being considered are Eurobonds, Environmental, social, and governance-linked notes and Sukuk, among others.
This will support the diversification of investor base and allow the country to achieve well-received deals and cost-efficient pricing.
“Notably, offshore market financing has become a more viable option in recent history with the aggressive tightening of sovereign spreads and the persistently elevated benchmark rates on concessional loans,” the report said.
In a previous briefing, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said that while the country is set to lose ODA privileges under UMIC, development partners have assured that, at least for the near term, the Philippines will continue to have access to similarly attractive loans.
“Many of our current ODA now are long-term anyway. That’s why we have been approving also many projects, because we want to take advantage of the situation where we are still a lower middle-income country,” Balisacan said.
“But again, we talk with our development partners, they tell us that there are other windows that could offer the same features as the window for lower middle-income countries. This is probably the thing that we want to explore,” he added.
NEDA also said that should the transition to UMIC status happen next year, there is still a grace period, which is up to 2027, for the concessional terms extended by ODA partners.
