THE Philippines has been listed as one of the top recipients of the Asian Development Bank’s (ADB) policy-based loans (PBLs) in the past 40 years, according to the multilateral development bank’s Independent Evaluation Department (IED).
In its report, the IED said the ADB has extended a total of 35 PBLs to the Philippines between 1978 and 2017, and 15 PBLs between 2008 and 2017, the highest number of PBLs granted to the Philippines during the 40-year period.
The ADB has granted a total of 451 PBLs and policy-based grants worth around $55 billion in the past 40 years. The most number of PBLs it granted to its developing member-countries (DMCs) was at 225 PBLs during the 2008 to 2017 period.
“Policy-based lending provides the ADB and other development banks with an opportunity to work with countries on reforms to promote economic growth and reduce poverty, so it has a high potential impact,” ADB’s IED Director General Marvin Taylor-Dormond said. “This type of lending supports governments in Asia and the Pacific, and countries value the policy advice from ADB’s cross-country expertise, based on its work in many countries of the region.”
The IED found policy-based lending is helping to meet country financing needs. One incentive for governments to tap policy-based loans—which can be quickly disbursed—is that they can meet immediate and anticipated budget and balance-of-payment financing needs.
However, IED said, PBLs are delivering uneven results on reform outcomes and this, it said, requires attention. In the Philippines and Bangladesh, IED said, “evaluations were not shared or discussed with country counterparts in the line ministries, meaning that the opportunity to attract potentially valuable inputs to inform assessments was lost.”
“The evaluation, however, raised concerns on whether the reforms supported tackled the region’s most urgent policy priorities, and whether the policy actions supported by the ADB were in themselves critical for removing constraints to growth and poverty reduction, the overall purpose of policy-based lending,” IED said.
Further, IED found that policy-based lending is primarily used in larger and better-off countries whose institutions are more capable of handling reforms.
Countries like the Philippines and Vietnam, the report stated, can easily access additional financing from the domestic and international capital markets.
IED said the evaluation recommends that the ADB should use policy-based lending to also support reforms in poorer and more fragile countries to help lift overall development in the region.
“Policy-based lending has the potential to advance the reforms that will be needed to tackle Asia’s many persistent and emerging development challenges,” said Joanne Asquith, team leader for the evaluation. “But donor funds in general are limited, so the right reforms and policy actions need to be identified and agreed on. ADB must focus on the critical reforms it wants to influence and countries must be fully committed to implement them.”
Nonetheless, IED said, PBLs have contributed to reforms include measures to increase local government revenues, promote public–private partnerships to help narrow large infrastructure gaps, and reforms to reduce costly fuel subsidies.
These have also helped in policies to help governments turn around state-owned enterprises loss, and in some countries, policy-based lending has been used to help develop more active capital markets.