THE Asian Development Bank (ADB) has approved a record $1.5 billion loan for the Philippine government to fund its fight against the coronavirus disease 2019 (COVID-19).
“This assistance is our largest budget support loan to the Philippines ever and reflects our strong commitment to providing cornerstone assistance swiftly and effectively to help the country mitigate the pandemic’s devastating impact on Filipinos, particularly the poor and vulnerable, including women,” ADB President Masatsugu Asakawa said in a statement.
The $1.5 billion loan will be priced similar to ADB’s other policy based loans but at a shorter tenor with the first $500 million to have a maturity period of 10 years, including three-year grace period on repayment. The remaining $1 billion will have a five-year maturity period, inclusive of a three-year grace period.
The Department of Finance (DoF) said the first tranche worth $1 billion is expected to be disbursed this month, while the rest may be credited before June 20.
This follows the ADB grants approved in March — the $5 million used for food packages to some 140,000 poorest households in Luzon, and the $3 million for the government’s purchase of medical supplies and establishment of a new laboratory expected to be fully functional by mid-May.
“ADB is also preparing additional financing for social protection and health projects in April and May this year, respectively,” the statement read.
ADB Philippines Country Director Kelly Bird said the $1.5-billion loan would be the last for the Philippines under ADB’s $20-billion fast-track facility program, but assured that the programmed $3 billion for other pipeline projects this year will continue.
“The pre-existing program associated with ‘Build, Build, Build,” and other initiatives that we were already engaged in is $3 billion. We’re certainly committed in continuing the assistance… It’s a similar situation in other countries, where the COVID-19 assistance is on top of existing program of engagement,” ADB Vice President for Operations 2 Ahmed Saeed said during the online briefing on Friday.
Mr. Bird said approval of all pipeline projects under ADB’s $3-billion lending program this year, including infrastructure ones, remains “on track” and could all be approved by July.
“[The government] will always go through priorization process and we’re working closely with them and monitoring the situation to the extent that will affect our 2020 program. We remain flexible with the government, and in this process, we’ll take the guidance from government in terms of scheduling approval development programs and projects,” he said.
The loans for infrastructure projects up for approval this year are the $1.2-billion South Commuter Railway Project, Angat Water Transmission Improvement Project ($126 million) and the Edsa Greenways Project ($130 million).
Other pipeline projects up this year are the Capital Market Generated Infrastructure Financing, Subprogram 1 ($400 million); the Competitive and Inclusive Agriculture Development Program, Subprogram 1 ($400 million); the Inclusive Finance Development Program, Subprogram 2 ($300 million); the Disaster Resilience Improvement Program ($500 million); the Expanded Social Assistance Program ($500 million) and the Local Government Property Tax Project ($26 million).
ADB announced late last year, before the coronavirus pandemic started, that it will scale up its lending program to the Philippines to average at $2.5 to $3 billion a year from 2019-2022.
Last year, it extended a total of $2.5 billion loans to the Philippines.
Mr. Bird said the $1.5-billion will partly fund the government’s COVID-19 Active Response and Expenditure Support (CARES) Program, partially worth $12.77 billion (P655.573 billion), or equivalent to 3.6% of gross domestic product (GDP).
“The main impact of the program is to mitigate the adverse impact of the pandemic on the economy and poverty. [The $12.8-billion program is a] selection of the government’s COVID-19 response program, we categorized this in five areas,” Mr. Bird said.
In his presentation, Mr. Bird said the bulk of the funds will be used for government financial assistance programs to affected sectors — $6.14 billion (P312 billion) for wage subsidy to employees of small businesses access to loans and credit guarantees for small enterprises, and $4.3 billion (P217.6 billion) for direct cash aids to poorest families, displaced workers and repatriated overseas Filipino workers.
The program also includes $986 million (P49.936 billion) for farmers and rice buffer stock, $792 million (P40 billion) as support for local governments, and $708 million (P35.812 billion) for medical supplies and capacities.
With this, Mr. Bird said they estimated the CARES program will have second-round effects for the first 12 months and will translate into $15.2 billion (4.2% of GDP) and by 2021, it could translate into $17.2 billion or 4.8% of GDP.
“The actual package could add about 4.8 percentage points to GDP, if not more, and it does that because the package is well-targeted… Those kind of items generally have quite large multliplier effects and that’s why we expect that this package to add over $17.2 billion to the economy,” he explained. — Beatrice M. Laforga