Philippines Secures Borrowing, Grant Access Post-Income Upgrade

MANILA, Philippines — The Department of Finance assured the public that the country’s borrowing strategy and access to grants will remain unchanged in the near term, following its recent upgrade to upper?middle income (UMIC) status. Finance Secretary Frederick Go said the upgrade could even strengthen the country’s investment appeal and creditworthiness, allowing it to borrow at lower rates. “There’s nothing for you to be worried about, at least in the near term, because we have to maintain our upper?middle income classification for at least three years before any change happens,” Go told reporters. The Marcos administration plans to borrow P2.68 trillion this year, P3.043 trillion for 2027 and P3.04 trillion for 2028, according to the latest Budget of Expenditures and Sources of Financing. “We’re not going to lose any grants,” he said, noting that grants from development partners will continue and borrowing costs will not rise within the three?year transition window. Last week, the World Bank announced that the Philippines breached the UMIC threshold from lower-middle income status after posting a gross national income per capita of $4,850 in 2025. “Now, if after the next three years we maintain our upper-middle income status, then yes, maybe some of our loans, the concessional loans at least, would be more expensive by maybe 10 basis points, 20 basis points,” Go said. He also said that concessional loans, which only accounted for about 10 percent of the borrowing portfolio, would remain accessible, with more options now provided by agreements with several countries such as Denmark and Spain. At the same time, Go said the Philippines might fall into the so?called “middle?income trap,” a stage where economies stall after rising to middle-income status. “You have to keep reducing your fiscal deficit. You have to spend more wisely. You have to find ways to generate sustainable revenues, then control inflation and ensure you have economic growth, high employment and increase the income per capita,” he said. Go, who also sits on the Bangko Sentral ng Pilipinas Monetary Board, echoed BSP Governor Eli Remolona Jr.’s view that the economy could absorb another 25-basis-point rate hike. However, this is “dependent on the numbers that will be generated by the research departments of the Bangko Sentral, both economic growth and inflation outlook.” “It’s always a balance between these two things when the monetary board makes a decision on whether to hike, reduce or stay as is interest rates, coordination between monetary and fiscal policies,” Go noted.