Topic: FORMS OF FOREIGN

BORROWING
A. Loans- carries the burden of future repayment
• A government obtains by selling its security (guarantee of the fulfillment of an undertaking
or the repayment of a loan) to a foreign country
• In the form of Official Development Assistance (ODA) entered into by the Philippine
government
* Soft loan- repayment is in the home/local currency; longer payments terms and not so
much restrictions
* Hard loan- repayment of the aid requires foreign currency; usually there are a lot of
restrictions like the requirement of a collateral; shorter payments terms
* The World Bank lends in hard loans, while the loans of its affiliates are soft loans.
Creditors:
a. Bilateral funders- sovereign governments or their aid development policy agencies
which generally provide concessional loans = 13.8% share
• As of 2018, (amounting to US$10.9 billion) comprised of Japan – US$7.9 billion;
China – US$772 million; and Germany – US$426 million
b. Multilateral funders: ADB, WB-International Bank for Reconstruction and
Development (WB-IBRD), International Fund for Agricultural Development (IFAD) and
Japan Bank for International Development (JBID)- recorded an average share of
17.4%.
*** IFAD loans typically reach 50 years with a grace period of 10 years at an interest
rate of 1.0- 4.0% p.a.
c. foreign banks and other financial institutions- has the largest share (33.6%) of
total outstanding debt
d. foreign holders of bonds and notes - 28.7%
e. other creditor types (mainly suppliers/exporters) – 6.4%
•
 CREDITORS

MULTILATERAL
16.91%

BILATERAL
13.41%
FOREIGN BANKS AND OTHER FINANCIAL INSTITUTIONS
35.57%
OTHER CREDITOR TYPES
6.22%

FOREIGN HOLDERS OF BONDS AND NOTES

27.89%

BILATERAL MULTILATERAL
FOREIGN BANKS AND OTHER FINANCIAL INSTITUTIONS FOREIGN HOLDERS OF BONDS AND NOTES
OTHER CREDITOR TYPES
B. Grants
• Viewed as free resources (non-repayable) and could therefore substitute for
domestic revenues
• Bounty, contributions, gift, or subsidy (in cash and kind) bestowed by a
government or other organization (grantor) for specified purposes to an
eligible recipient (grantee).
• Grants are usually condition upon certain qualifications as to the use,
maintenance of specified standards, or a proportional contribution by the
grantee or other grantor/s.
• Most grants are made to fund a specific project and require some level of
compliance and reporting.
Source: 2017-ODA-Portfolio-Review_online
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