Defense Secretary Gilberto Teodoro, Jr. on Tuesday urged lifting a finance cap that limits the amount the Philippines could borrow from foreign lenders, as the country seeks to modernize its forces amid tensions with China.
At the House hearing on the Department of National Defense’s (DND) budget for 2027, Teodoro told lawmakers that the finance and budget departments set the loan limit, so it would be better to scrap the $300 million cap imposed under a 1974 presidential decree.
Presidential Decree No. 415 authorizes the president ‘to contract such loans, credits or indebtedness including supplier’s credit, deferred payment arrangements upon such terms and conditions as maybe agreed upon with any local or foreign source or lender not exceeding Three hundred million United States dollars, or its equivalent in other foreign currencies at the exchange rate prevailing at the time of the contracting of the loans.’
‘They have total control over the financial agreement that will be made,’ Teodoro said.
The Philippines is seeking to modernize its forces amid tensions with China in the West Philippine Sea, part of the South China Sea within the Philippine exclusive economic zone. It has earmarked about $35 billion, or P2 trillion, over the next decade for military upgrades, including warships, aircraft and auxiliary systems.
Funding limitations have hobbled efforts to expand Manila’s military capabilities. The DND was allotted P40 billion for its modernization efforts this year, with an additional P50 billion in standby funding.
Teodoro said the P50 billion it proposed for upgrades next year is earmarked for multiyear contract payments.
‘As the days go on, things get more expensive,’ he added.