Amendment to Foreign Borrowings Act

Presidential Decree No. 1939 is issued by the President of the Philippines pursuant to constitutional powers.
Section 1 directs amendments to Section 2 of Republic Act No. 4860, as amended.
Section 2 further amends the last paragraph of Section 3 of Republic Act No. 4860, as amended.
Section 3 adds a new paragraph “A” to Section 3 of Republic Act No. 4860, as amended.

The decree adjusts the authorized ceiling on foreign borrowings to accommodate general rescheduling, restructuring, or refinancing of the Philippines’ external debt.
The decree adjusts the ceiling correspondingly for foreign debt that the Government guarantees.
The decree establishes conditions and limits for foreign borrowing and Government guarantees, including reductions of external debt service burdens.

Section 2 amends Section 2 to set a ceiling: the President may incur foreign loans, credits, or indebtedness (excluding interests and other normal banking charges imposed or charged by the named institutions).
The ceiling is not in excess of ten billion United States dollars or its equivalent in other foreign currencies, using the exchange rate prevailing at the time the loans, credits, or indebtedness are incurred.
Borrowing must have terms of payment of not less than 10 years, except for borrowing contracted in the interest of national security and rehabilitation resulting from natural calamities.
Section 2 requires that price, interest rates, and other charges on loans, credits, or indebtedness from non-governmental national or international lending institutions or firms extending supplier’s credits or deferred credit arrangements be determined by rules and regulations that the Central Bank may promulgate.

Section 2 mandates that 75% of the total authorized foreign borrowing amount of ten billion United States dollars (or its equivalent) shall be incurred for projects of the public sector.
Section 2 mandates that 25% shall be utilized for projects of the private sector.
Section 2 prohibits any individual, partnership, cooperative, association or private corporation from borrowing more than 15% of the total of the loans, credits, or indebtedness authorized to be incurred for relending by the Development Bank of the Philippines or any other government financial institution.
Section 2 provides an exception: the limitation does not apply to those undertaking projects whose financial requirements exceed the 15% limit if there is a recommendation of the National Economic and Development Authority and approval by the President to exceed the limit.

Section 2 requires that the Central Bank of the Philippines promulgate and enforce measures necessary to reduce external debt service requirements to an annual level not exceeding 20% of the foreign exchange receipts of the immediately preceding year.
Section 2 authorizes a special carve-out: whenever necessary for a general rescheduling, restructuring or refinancing of the external debt by foreign creditors, the President, upon recommendation of the Monetary Board of the Central Bank, may exclude specific categories of external debt from the 20% ceiling.

Section 2 amends Section 3 by increasing/setting the guarantee ceiling: the total foreign loans, credits, or indebtedness incurred, and the proceeds of bonds, securities, or other evidences floated or issued that may be guaranteed by the President under Section 3 must not be more than 7.5 billion United States dollars or its equivalent in other foreign currencies, using the exchange rate prevailing at the time the guarantee is made.
The guarantee ceiling excludes interest and other normal banking charges imposed or charged by the International Bank for Reconstruction and Development, the Asian Development Bank, and other similar international financial institutions.

Section 3 adds a new paragraph A to Section 3.
Paragraph A provides that, notwithstanding the preceding paragraphs, the President of the Philippines may guarantee on behalf of the Republic of the Philippines foreign loans or credits to, or external indebtedness of, corporations including financial institutions owned or controlled by the Government.
Paragraph A authorizes this guarantee when necessary in connection with:
- a general rescheduling, restructuring or refinancing by foreign creditors; or
- credits obtained to finance short-term trade.
Paragraph A requires procedural prerequisites: 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.

Section 4 repeals, revokes, or modifies any provision of law or regulations inconsistent with Presidential Decree No. 1939.