THE government has so far secured a total of $6.508 billion in loans and grants from foreign lenders, including the $750-million loan from China-led Asian Infrastructure Investment Bank (AIIB), to finance the government’s response to the Covid-19 pandemic.
Finance Undersecretary Mark Dennis Y.C. Joven, head of the DOF’s International Finance Group, told the BusinessMirror they are still in talks with multilateral lenders, such as Asian Development Bank and AIIB, and the country’s bilateral partners Japan and France for more potential financing agreements for Covid-19 response.
Last Friday (June 5), the Philippines signed the $750-million loan accord with AIIB.
The loan amount, which the government expects to be fully disbursed within June, is not yet included in the $5.758 billion worth of financing agreements posted by the Department of Finance (DOF) on its website.
According to a separate statement from DOF, the $750-million loan agreement cements AIIB’s commitment to co-finance with ADB the Philippines’ Covid-19 Active Response and Expenditure Support (CARES) program, a quick-disbursing budget support facility designed to fund the government’s efforts to combat Covid-19 and mitigate the adverse impact of the contagion on the economy.
The loan package from AIIB carries a maturity period of 12 years inclusive of a three-year grace period.
The AIIB’s co-financing for the CARES program is the second loan it has extended to the Philippines.
In 2017 the AIIB approved a $207.6-million loan for the $500-million Metro Manila Flood Control Management Project, which it co-financed with the World Bank.
Under its Covid-19 Crisis Recovery Facility, the AIIB has committed an initial $5 billion to $10 billion “to support AIIB members’ urgent economic, financial and public-health needs and quick recovery from the crisis.”
As of June 4, the Department of Finance said in a separate report it has raised $5.65 billion in budgetary support financing from the Asian Development Bank (ADB), World Bank and from the issuance of double-tranche 10-year and 25-year dollar-denominated global bonds.
Of this amount, $4.05 billion has been disbursed to the government.
Broken down, the $5.65-billion budgetary support financing includes three loans from ADB ($2.1 billion), three loans from World Bank ($1.2 billion) and the sale of $2.35 billion 10-year and 25-year dollar-denominated global bonds.
On top of the budgetary support financing from foreign lenders, the Philippines has also secured a total of $108 million in grant and loan financing to support the various projects to be implemented by agencies involved in Covid-19 response.
Of the $108 million, project loan financing amounted to $100 million while the remaining $8 million was for grant assistance.
Of the $8-million grant assistance, $5 million came from ADB for Rapid Emergency Supplies Provision and $3 million from ADB as well for Covid-19 Emergency Response Project.
Only the $100-million Covid-19 Emergency Response Project loan agreement with World Bank was listed so far under project loan financing.
The country’s debt-to-GDP ratio is projected by the government to increase to 49.8 percent this year from 39.6 percent last year.
For 2021 and 2022, the Cabinet-level Development Budget Coordination Committee (DBCC) expects an even higher debt-to-GDP ratio of 51.5 percent and 52.3 percent, respectively.
Despite the projected increase in the country’s debt-to-GDP ratio, economic managers had said this is still far lower than the most recent peak of 71.6 percent in 2004.
Debt-to-GDP ratio is used to gauge a country’s ability to pay off its debt.
Image credits: AP/Aaron Favila
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