PH eyes new offshore funding options as ODA access wanes

The Philippine government is evaluating alternative formats for its offshore financing needs as the nation prepares to graduate to upper middle-income status in 2024, signaling reduced reliance on official development assistance (ODA) loans.

Economic managers from the Development Budget Coordination Committee (DBCC) revealed on Thursday that the government is considering instruments such as Eurobonds, Environmental, Social, and Governance (ESG)-linked notes, and Sukuk (Islamic bonds).

"The national government capitalizes on the Philippines’ sovereign creditworthiness to access affordable credit from offshore markets, supplementing regular domestic funding operations," the DBCC stated in its report.

As the country transitions to upper middle-income status, its access to subsidized ODA loans, which typically come with lower interest rates, will gradually diminish. However, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan assured that development partners have committed to extending access to ODAs in the near term.

"We are told that ODA privileges diminish once you graduate from lower middle-income status. However, our development partners have assured us that we will continue to have access to similarly attractive loans for the near term," Balisacan explained.

ODA loans and grants, aimed at promoting sustainable development, have historically been provided by governments with diplomatic or trade relationships with the Philippines.

NEDA Undersecretary Joseph Capuno added that a grace period until 2027 will allow the country to take advantage of concessional ODA terms. "We are in discussions with development partners and implementing agencies to expedite the preparation of ODA-funded flagship infrastructure projects," he said.

With this transition, the government aims to maintain its reliable access to foreign currency-denominated financing while leveraging innovative funding mechanisms to meet its development goals. These efforts align with the country’s broader objective of sustaining economic growth and strengthening fiscal stability.