NADI, Fiji—The Philippines believes it will “graduate” to upper middle income country (UMIC) status this year, sooner than expected, and this will likely result in “changes” in its financing efforts, according to the country statement submitted to the Asian Development Bank (ADB) Board of Governors.
In the statement issued by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, who is the Alternate Governor of the Philippines in ADB, the country will continue to rely on its programs with the Manila-based multilateral development bank (MDB) to achieve inclusive growth.
“The Philippines has benefited immensely from cooperation with the ADB’s programs. This year—sooner than we expected—the country will ‘graduate’ into the ranks of upper middle-income economies. While this will result in small changes in the terms of bank financing, we expect to sustain the solidarity that has characterized this community for decades,” Diokno said.
“Within the next few years, we expect to achieve a truly inclusive economy that ultimately redounds to the benefit of our people. In this aspiration, we will continue to rely on the collaborative programs we have begun with the ADB,” he added.
AIIB, too
Diokno, however, urged ADB to harmonize its efforts together with China-led AIIB and to come up with innovative products that will promote a better quality of life for Filipinos.
He said ADB needs to harmonize its efforts and explore complementarities with other multilateral institutions such as the World Bank and the AIIB to achieve efficient and effective delivery of services.
Specifically, the BSP governor also said there should be better coordination among institutions in terms of development finance. Diokno said with technology, the MDBs like ADB and governments like the Philippines should “constantly reinvent” programs to better address human capital challenges.
With this, Diokno urged the ADB to expand its knowledge generation for its developing member-countries (DMCs) including the Philippines. He said the focus of these products must go beyond economics, finance and infrastructure.
“We urge that knowledge generation and management be expanded to cover other facets of development. One that is not only focused on economics, finance and infrastructure—but in related aspects such as poverty reduction, gender, governance and institutions, climate change and environment, conflict and fragility, health and education,” Diokno said.
UMICs still need loans
Meanwhile, UMICs must continue to have access to concessional loans given the development challenges that they still face, an official of the Department of Finance (DOF) said on Thursday.
Finance Undersecretary Mark Dennis Y.C. Joven told the BusinessMirror in an interview that reaching UMIC status does not mean a country has already addressed its development constraints.
The country’s economic managers said the Philippines may join the ranks of upper middle-income countries this year. Multilateral financing institutions such as the ADB have a graduation policy where countries that have reached a certain level of development will no longer qualify for concessional loans.
He noted that no less than the World Bank said UMICs have “unfinished development agendas” and are still prone to global shocks. The World Bank said UMICs face “many second-generation challenges” that could undermine their growth.
The World Bank said these second-generation
challenges are “inequality, unplanned urbanization, gaps in public-sector
performance, weak private sector, low levels of innovation and an overall lack
of global
competitiveness.”
The Philippines is now preparing for the possibility of graduating from ADB concessional financing once it becomes an upper middle-income country. Joven said the government is now making preparations to enable the Philippines to finance its development needs in the future.
These measures include fiscal policy reforms that seek to strengthen the capability of the government to generate funds, as well as efforts to fast-track “game-changing infrastructure projects” that will bring the country “to a higher level of play.”