THE Department of Finance (DOF) has welcomed a proposal by the Asian Infrastructure Investment Bank (AIIB) to explore the possibility of local currency financing and a variable spread facility in providing loans to help fund the “Build, Build, Build” (BBB) program of the Duterte administration.
During the meeting of the Philippine delegation with Chinese officials in China last week, Finance Secretary Carlos G. Dominguez III pointed out that the AIIB is also eyeing possible cofinancing arrangements with other multilateral institutions in terms of implementing big-ticket infrastructure projects under the BBB initiative.
AIIB President Jin Liqun assured Philippine officials that the bank will focus on “the actual work” in implementing infrastructure projects to ensure that they get completed on schedule without any hidden or added costs, according to Dominguez.
“We are quite sensitive to interest rates. Although they may seem small amounts, we do not want to reverse the trend of lowering our spreads. So it is very encouraging that you are considering variable spreads [over the Libor facility]. I was hoping for an update on it. We are happy about the local currency bonds, as well,” Dominguez told AIIB officials during the meeting.
Libor, or the London Inter Bank Offered Rate, is the benchmark reference rate used for debt instruments.
“We explore other possibilities and we are looking at the possibility of variable interest rate, we are looking at the possibility of local currency financing,” Jin said.
Dominguez explained that the Philippines now has a lot of headroom in funding its massive infrastructure program through various financing arrangements, following the passage and implementation of the first package of President Duterte’s Comprehensive Tax Reform Program (CTRP), along with improved tax administration efforts of the government, substantially increased revenue collections for the first seven months of this year.
The AIIB’s first project with the Philippines, which was approved on September 27, 2017, is the $500-million Metro Manila Flood Management Project, which it is cofinancing
with the World Bank.
The bank also shortlisted several Philippine projects, including the Pasacao-Balatan Tourism Coastal Highway and the Camarines Sur Expressway for possible financing.
The AIIB is a multilateral development bank that aims to aid the building of infrastructure in the Asia-Pacific region. It currently has 86 member-states from around the world.
Earlier, the Philippine delegation met separately with China’s State Councilor and Foreign Minister Wang Yi, Commerce Minister Zhong Shan to discuss the progress of the Duterte administration’s flagship infrastructure projects and ways to swiftly address challenges in their implementation.
The delegation also met with Vice Premier Hu Chunhua, who underscored the need to further strengthen bilateral relations with the Philippines through enhanced cooperation in the areas of trade, investment and people-to-people exchanges.