SUBJECT: The Concept of ‘The Borrowing Power’ of the President

I. Introduction

This memorandum provides an exhaustive analysis of the borrowing power of the President of the Republic of the Philippines under the 1987 Constitution and relevant statutes. The power to contract loans, both domestic and foreign, is a critical fiscal tool for national development and economic management. This research will delineate the constitutional basis, statutory framework, limitations, and the interplay between executive and legislative branches concerning this power. The analysis will also cover the role of key government agencies, historical context, and comparative perspectives.

II. Constitutional Foundation

The primary source of the President’s borrowing power is Article VII, Section 20 of the 1987 Constitution, which states: “The President may contract or guarantee foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. The Monetary Board shall, within thirty days from the end of every quarter of the calendar year, submit to the Congress a complete report of its decisions on applications for loans to be contracted or guaranteed by the Government or government-owned and controlled corporations which would have the effect of increasing the foreign debt, and containing other matters as may be provided by law.”
This provision establishes a shared authority, requiring both the concurrence of the Monetary Board of the Bangko Sentral ng Pilipinas and, by reference, limitations set by Congress through law. It is distinct from the congressional power to authorize the public debt under Article VI, Section 25(1).

III. Statutory Framework and Implementing Laws

The constitutional mandate is implemented primarily by two laws:

Republic Act No. 4860, as amended (The Foreign Borrowings Act): This law governs foreign loans contracted or guaranteed by the Republic. It requires that all foreign borrowing proposals by the National Government, its agencies, and government-owned and controlled corporations (GOCCs) be approved by the Monetary Board. It further mandates that such borrowings be used for sound projects and that the terms are reasonable.

Administrative Code of 1987 (Executive Order No. 292): Book VI, Chapter 7, specifically Sections 35-41, outlines the administrative procedures for foreign and domestic borrowing. It reiterates the need for Monetary Board concurrence for foreign loans and designates the Secretary of Finance as the principal official responsible for recommending debt operations to the President.

IV. Distinction: Foreign vs. Domestic Borrowing

A critical distinction exists in the legal treatment of foreign and domestic borrowing.
Foreign Borrowing: As per Article VII, Section 20, contracting or guaranteeing foreign loans requires the prior concurrence of the Monetary Board. This is a specific constitutional checkpoint intended to manage foreign debt, exchange risks, and overall monetary stability.
Domestic Borrowing: The Constitution does not explicitly mention domestic borrowing by the President. This power is inferred from the President’s general executive power and the role as Chief Executive. However, domestic borrowing is heavily regulated by statute, particularly through the annual General Appropriations Act (GAA) which sets the deficit ceiling, and by Republic Act No. 4860 (as amended) which also covers domestic borrowing by GOCCs. The Bureau of the Treasury under the Department of Finance manages domestic debt issuance.

V. The Role of the Monetary Board

The Monetary Board‘s concurrence is not a mere formality but a substantive review. The Board evaluates the impact of the proposed foreign loan on the country’s foreign exchange position, external debt level, monetary stability, and the sustainability of the debt. Its quarterly reporting requirement to Congress is a transparency mechanism intended to facilitate legislative oversight over the executive’s exercise of the borrowing power.

VI. Limitations and Congressional Oversight

The President’s borrowing power is not absolute. Key limitations include:

Prior Concurrence of the Monetary Board: A mandatory condition for foreign loans.

Limitations as Provided by Law: Congress, through legislation like the GAA, Republic Act No. 4860, and other laws (e.g., the Local Government Code restrictions on LGUs), sets overall debt ceilings, budgetary constraints, and procedural rules.

Constitutional Debt Ceiling: Article VI, Section 25(1) provides that “Congress may not increase the public debt as recommended by the President.” This inverts the usual legislative process, creating a ceiling that Congress can only decrease, not increase, from the President’s recommendation.

Purpose and Accountability: Borrowed funds must be used for public purpose and are subject to audit by the Commission on Audit.

Treaty Concurrence Requirement: While not a borrowing per se, Article VII, Section 21 requires Senate concurrence for international economic agreements, which may include loan agreements with multilateral institutions.

VII. Comparative Analysis (Philippines, United States, United Kingdom)

The following table provides a comparative overview of the borrowing power across different jurisdictions.

Jurisdiction	Constitutional / Legal Source	Primary Authority	Key Legislative Role	Notable Conditions / Limitations
Philippines	Art. VII, Sec. 20, 1987 Constitution; R.A. 4860	The President	Congress sets debt ceilings via law; Senate concurs on treaties; MB prior concurrence for foreign loans.	Prior concurrence of the Monetary Board for foreign loans; Congressional debt ceiling (can only be decreased).
United States	Art. I, Sec. 8, U.S. Constitution	Congress (Power to “borrow Money on the credit of the United States”)	Congress delegates authority to the Treasury Secretary within statutory debt limits set by Congress.	Congress must authorize the public debt limit; Executive acts under delegated authority; No central bank concurrence requirement.
United Kingdom	No written constitution; Parliamentary Sovereignty	HM Treasury (Executive)	Parliament authorizes through the Consolidated Fund Act and annual Appropriation Acts.	Governed by the National Loans Act 1968; Treasury acts with authority granted by Parliament; No statutory debt ceiling.

VIII. Relevant Jurisprudence

The Supreme Court has touched upon aspects of the borrowing power and public debt.
In Gonzales v. Raquiza (G.R. No. L-383, 1946), the Court upheld the validity of emergency measures involving borrowing and issuance of emergency notes, recognizing the necessity of such powers in times of crisis.
The principle underlying the constitutional debt ceiling (Art. VI, Sec. 25(1)) was discussed in context in Philippine Constitution Association v. Enriquez (G.R. No. 113105, August 19, 1994), which, while focusing on the Congressional Pork Barrel, reaffirmed Congress’s power of the purse and its role in setting fiscal parameters.
The case of Saguisag et al. v. Executive Secretary et al. (G.R. No. 212426, January 12, 2016), concerning the Enhanced Defense Cooperation Agreement (EDCA), reiterated the distinction between an executive agreement and a treaty, which is relevant for loans or aid packages that may be structured as part of such international agreements.

IX. Procedure in Practice

The standard procedure for contracting a foreign loan involves: (1) project identification by an agency or GOCC; (2) endorsement and evaluation by the National Economic and Development Authority (NEDA) and the Department of Finance; (3) application for concurrence with the Monetary Board; (4) upon MB approval, negotiation of loan terms; (5) execution of the loan agreement by the President or authorized representative; and (6) inclusion of debt service in annual budget proposals to Congress.

X. Conclusion

The borrowing power of the Philippine President is a potent but constitutionally constrained executive function. It is a shared power, requiring the technical concurrence of the independent Monetary Board for foreign loans and operating within the fiscal boundaries set by Congress. The framework established by the 1987 Constitution seeks to balance the Executive’s need for flexibility in fiscal management with safeguards for monetary stability, legislative oversight, and public debt sustainability. The distinction between foreign and domestic borrowing, with stricter constitutional checks on the former, underscores the framers’ intent to protect the national economy from the risks associated with external debt.