QuestionsQuestions (PRESIDENTIAL DECREE NO. 1939)
PD 1939 was issued pursuant to the President’s constitutional powers to further amend RA 4860 (Foreign Borrowings Act). Its purpose is to adjust the ceilings and rules on foreign borrowings/guarantees in light of the general rescheduling, restructuring, or refinancing of the Philippines’ external debt, including allowing exclusion of certain debt categories from the ceiling and enabling government guarantees for loans of government-owned/controlled corporations.
The total amount shall not exceed ten billion (US) dollars or its equivalent in other foreign currencies, using the exchange rate prevailing at the time the loans/credits/indebtedness are incurred.
The loans/credits/indebtedness must have terms of payment of not less than 10 years. Exception: those contracted in the interest of national security and rehabilitation resulting from natural calamities.
They are to be determined by rules and regulations that may be promulgated by the Central Bank.
Seventy-five percent (75%) must be incurred for projects of the public sector, while twenty-five percent (25%) is to be utilized for projects of the private sector.
No such entity may borrow more than fifteen percent (15%) of the total of the loans/credits/indebtedness authorized for relending by the Development Bank of the Philippines (DBP) or other government financial institution.
When the borrower’s financial requirements are in excess of the limitation. In that case, the recommendation of the NEDA and the approval by the President to exceed the limit are required.
The Central Bank shall promulgate and enforce measures to reduce external debt service requirements to an annual level not exceeding 20% of the foreign exchange receipts of the immediately preceding year.
Yes. Whenever necessary in connection with a general rescheduling, restructuring or refinancing by foreign creditors, the President may, upon recommendation of the Monetary Board of the Central Bank, exclude specific categories of external debt from the ceiling.
It shall not be more than seven and a half billion (US) dollars or its equivalent in other foreign currencies at the exchange rate prevailing when the guarantee is made, excluding interest and other normal banking charges imposed or charged by specified international financial institutions.
PD 1939 (1) amended the last paragraph of Section 3 to set a reduced/adjusted cap for guarantees (7.5 billion USD equivalent) and (2) added a new paragraph (A) to Section 3 allowing government guarantees by the President for foreign loans/credits of government-owned/controlled corporations in certain rescheduling/refinancing or short-term trade situations, subject to specified recommendations.
Whenever necessary in connection with (1) a general rescheduling, restructuring or refinancing by foreign creditors or (2) credits obtained to finance short-term trade.
The President must act upon recommendation of the Minister of Finance, the Monetary Board of the Central Bank of the Philippines, and the National Economic and Development Authority (NEDA).
It covers foreign loans/credits or external indebtedness of corporations, including financial institutions, owned or controlled by the Government of the Republic of the Philippines.
Any provision of law or regulations inconsistent with PD 1939 is repealed, revoked, or modified accordingly.
It takes effect immediately. Practically, the amended ceilings, allocation rules, and conditions on guarantees apply upon issuance, affecting subsequent foreign borrowings and guarantees.