Sec. 20. 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 30 days from the end of every quarter of the calendar year, submit to the Congress a complete report of its decision 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. (Art. VII, 1987 Constitution)


 What are the limitations on the borrowing power of the President?

1. There must be prior concurrence of the Monetary Board
2. It is subject to such other limitations
Why is there a need of prior concurrence of the Monetary Board?

A President may be tempted to contract or guarantee loans to subsidize his program of government and leave it to succeeding administration to pay. Also, foreign lending institutions may impose conditions on loans that might impair our economic and even political independence. [Cruz, Philippine Political Law, p. 223 (1995 ed)]


Why the Monetary Board?

Because the Monetary Board has expertise and consistency to perform the mandate since such expertise or consistency may be absent among the Members of Congress. [Bernas Primer at 325 (2006 ed.)]


What is the duty of the Monetary Board?

The Monetary Board shall, within 30 days from the end of every quarter of the calendar year, submit to the Congress a complete report of its decision 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. (Sec. 20, Art. VII)


Why is the submission of report required?

In order to allow Congress to act on whatever legislation may be needed to protect public interest. [Bernas Primer at 325 (2006 ed.)]


Does the President need prior approval by the Congress of the exercise of his borrowing power?

No.

(1) Because the Constitution places the power to check the President’s power on the Monetary Board;
(2) BUT Congress may provide guidelines and have them enforced through the Monetary Board


May the President delegate his power to contract or guarantee foreign loans to the Finance Secretary?

Yes. The evident exigency of having the Secretary of Finance implement the decision of the President to execute the debt-relief contracts is made manifest by the fact that the process of establishing and executing a strategy for managing the governments debt is deep within the realm of the expertise of the Department of Finance, primed as it is to raise the required amount of funding, achieve its risk and cost objectives, and meet any other sovereign debt management goals.

If the President were to personally exercise every aspect of the foreign borrowing power, he/she would have to pause from running the country long enough to focus on a welter of time-consuming detailed activities the propriety of incurring/guaranteeing loans, studying and choosing among the many methods that may be taken toward this end, meeting countless times with creditor representatives to negotiate, obtaining the concurrence of the Monetary Board, explaining and defending the negotiated deal to the public, and more often than not, flying to the agreed place of execution to sign the documents. This sort of constitutional interpretation would negate the very existence of cabinet positions and the respective expertise which the holders thereof are accorded and would unduly hamper the President's effectivity in running the government. (Constantino v. Cuisia, G.R. No. 106064, October 13, 2005)


May the President institute financing program which would extinguish portions of the country’s pre-existing loans through either debt buyback or bond-conversion? Are buyback or bond conversion authorized by Article VII, Section 20?

The language of the Constitution is simple and clear as it is broad. It allows the President to contract and guarantee foreign loans. It makes no prohibition on the issuance of certain kinds of loans or distinctions as to which kinds of debt instruments are more onerous than others. This Court may not ascribe to the Constitution the meanings and restrictions that would unduly burden the powers of the President. The plain, clear and unambiguous language of the Constitution should be construed in a sense that will allow the full exercise of the power provided therein. It would be the worst kind of judicial legislation if the courts were to construe and change the meaning of the organic act.

The only restriction that the Constitution provides, aside from the prior concurrence of the Monetary Board, is that the loans must be subject to limitations provided by law. In this regard, we note that Republic Act (R.A.) No. 245 as amended by Pres. Decree (P.D.) No. 142, s. 1973, entitled An Act Authorizing the Secretary of Finance to Borrow to Meet Public Expenditures Authorized by Law, and for Other Purposes, allows foreign loans to be contracted in the form of, inter alia, bonds. (Constantino v. Cuisia)
Bar Questions:

 1. The President of the Philippines authorized the Secretary of Public Works and Highways to negotiate and sign a loan agreement with the German Government for the construction of a dam. The Senate, by a resolution, asked that the agreement be submitted to it for ratification. The Secretary of Foreign Affairs advised the Secretary of Public Works and Highways not to comply with the request of the Senate. Is the President bound to submit the agreement to the Senate for ratification? (Bar Question 1994, No. 13) 

 No, the President is not bound to submit the agreement to the Senate for ratification. Under Section 20, Article VII of the Constitution, only the prior concurrence of the Monetary Board is required for the President to contract foreign loans on behalf of the Republic of the Philippines.


 2. What are the restrictions prescribed by the Constitution on the power of the President to contract or guarantee foreign loans on behalf of the Republic of the Philippines? Explain. (Bar Question 1999, No. 1) 

 Under Section 20, Article VII of the Constitution, the power of the President to contract or guarantee loans on behalf of the Republic of the Philippines is subject to the prior concurrence of the Monetary Board and subject to such limitations as may be prescribed by law.