May 21, 2026 l Manila Bulletin
The Philippines has made infrastructure the centerpiece of its development strategy. Since the launch of the Build, Build, Build program and its continuation under the Build Better More initiative, public infrastructure spending has climbed to roughly five to six percent of GDP—among the highest levels in the country’s history. The objective is straightforward: close the infrastructure gap with Asian neighbors and support long-term economic growth.
Yet beneath the optimism surrounding roads, bridges, railways, and flood-control projects lies a quieter issue that deserves more attention: the financing chain that sustains infrastructure development itself.
Infrastructure construction does not run solely on government appropriations; it relies heavily on bank credit. Contractors must mobilize equipment, procure materials, and pay workers long before the government releases payment. To bridge this gap, they borrow from banks through working-capital lines and short-term project financing, often secured by progress billings or government receivables. In effect, banks become the indirect financiers of public infrastructure.
This arrangement works smoothly when payments move predictably. Contractors complete milestones, agencies certify accomplishments, the government disburses funds, and the contractor services its bank obligations. But once the payment cycle slows, stress quickly ripples across the system.
Many bankers today privately acknowledge a difficult reality: while government receivables may be among the safest assets from a credit perspective, they are not always reliable from a cash-flow timing perspective. Payments for government projects typically pass through multiple layers of documentation, validation, budget releases, and cash programming. The Commission on Audit (COA) may require additional reviews of accomplishments, budget releases depend on the Department of Budget and Management (DBM), and actual cash disbursement is tied to Treasury scheduling.
Recent developments have further complicated this process. Anecdotal evidence from many banks suggests that payment releases for infrastructure contractors are encountering heightened scrutiny and slower processing following controversies surrounding anomalous flood-control projects. The government’s tougher stance is understandable and, in many respects, necessary; public funds must be protected and irregularities thoroughly investigated.
However, as often happens in large systems, legitimate contractors can get caught in the tightening process. Even contractors with clean projects and properly documented accomplishments are reportedly experiencing longer turnaround times for billing approvals and payment releases. This, in turn, creates cash-flow strains that eventually reach the banking sector.
The core problem usually is not insolvency. Most contractors remain fundamentally viable because the government eventually pays. The issue is timing.
When receivables are delayed beyond expected schedules, contractors begin requesting maturity extensions, the restructuring of working-capital lines, or temporary relief from banks. Credit committees consequently become more cautious about lending against government receivables—not because the sovereign is viewed as a weak payer, but because the predictability of the collection cycle has become less certain.
This matters more than many realize. Infrastructure catch-up requires enormous private-sector participation. Government budgets alone cannot support the scale and speed needed for the Philippines to narrow the gap with regional peers. Contractors depend on financing, and financing depends on confidence in cash flows.
If banks begin treating government receivables more conservatively, several consequences may emerge: tighter credit lines, higher collateral requirements, increased borrowing costs, and a reduced appetite among contractors to aggressively bid for projects. Infrastructure implementation then slows, not because of engineering limitations, but because of financing friction.
This is where policy coordination becomes critical. Other Asian economies have strengthened infrastructure financing not only by increasing spending, but by improving the reliability and efficiency of government payment systems. Digital procurement and billing platforms in countries like Singapore and South Korea allow for faster verification and more transparent payment tracking, giving contractors and banks greater confidence in receivable conversion.
The Philippines needs to move in the same direction. Digitizing progress billing systems, improving inter-agency coordination, and establishing clearer timelines for processing legitimate claims could help reduce unnecessary delays without weakening audit safeguards. Strong accountability and efficient disbursement should not be viewed as conflicting objectives.
The Bangko Sentral ng Pilipinas (BSP) may also have an important supporting role to play. The BSP could encourage more structured supply-chain financing frameworks for verified government receivables and provide clearer prudential guidance on infrastructure-related working-capital exposures. A more developed receivables-financing framework could improve liquidity for legitimate contractors while preserving sound credit standards.
Infrastructure development is often framed as a fiscal or engineering challenge. In reality, it is equally a financial-system challenge. When payment systems work smoothly, contractors remain liquid, banks remain confident, and projects move forward. But when legitimate receivables become slower to convert into cash, hesitation spreads quietly through the financing chain.
And when bankers hesitate, infrastructure catch-up becomes much harder to achieve.
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email benel_dba@yahoo.com. Photo is from Pinterest.