MANILA - The Bangko Sentral ng Pilipinas (BSP) has approved the government’s plan to tap foreign developmental institutions for $655 million in loans to finance the country’s social welfare programs.
BSP Deputy Governor and Officer in Charge Amando Suratos said the loans would come from the International Bank for Reconstruction and Development (IBRD), Japan International Cooperation Agency (JICA) and Asian Development Bank (ADB).
The loan from IBRD, which is an arm of the World Bank, is for $405 million and will be used to improve the operations of Department of Social Welfare and Development, including the grant of subsidies to poor families. The loan is payable in 25 years and carries an interest of 0.25 percent plus a charge equivalent to the US dollar Libor (London Interbank Offered Rate) and a bench-mark spread.
The JICA loan, for $150 million, would serve as budgetary support for the national government with the Department of Finance deciding which programs to finance. The loan is payable in 15 years and will carry an interest equivalent to the Japanese yen Libor for a period of six months.
The funds from ADB—$100 million—will be payable in 30 years with interest of 1.4 percent per annum.
Suratos said the JICA and ADB loans would also require a commitment fee of 0.1 percent per annum based on the amount that had not been disbursed as scheduled.
Commitment fees are what developmental lenders charge for funds that recipient governments fail to disburse as scheduled.
Suratos also said that the Jica and ADB loans would improve the government’s fiscal management programs.
The government is borrowing funds because its revenue collection, which includes taxes, has been falling below expenditures since the late 1990s.
This year, the government expects to incur a budget deficit of P293 billion.
The government plugs the deficit through borrowings, either from foreign or domestic sources. Foreign borrowings may be done by tapping developmental lending institutions for loans and by selling bonds in the international capital market.
In January, the government sold $1.5-billion worth of bonds in offshore markets, the proceeds of which would partly fund the deficit and pay off maturing obligations.
Borrowing from the domestic market entails the sale of treasury bills and bonds to banks, which in turn sell these instruments to their clients.
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