Government to shun international capital market in favor of ODA next year

The National Government will rely next year on official development assistance (ODA) and funding from bilateral and multilateral financial institutions to help finance its budgetary requirements.

This was revealed yesterday by Finance Secretary Jose T. Pardo who said ODA, bilateral and multilateral financing would supplement domestic borrowings. As a last resort, the government will only go back to the international capital market if the domestic funding and ODA funds are not enough.

Pardo revealed that the country has $10.3 billion in ODA funds that have not yet been utilized.

He denied claims that the Estrada government has been shut out of any further new ODA funds until it institutes key structural reforms in the political arena. Former Finance Secretary Edgardo B. Espiritu had said that the Estrada government has been shut out from any new ODA funding until it institutes structural political reforms as well as economic reforms.

The World Bank, one of the country’s primary multilateral sources of funding, has suspended the release of the remaining $200 million in the Bank Sector Reform Loan (BSRL) following the failure of the country to meet key conditionalities on fiscal performance.

The same conditionalities on fiscal performance, specifically revenue generation and the budgetary deficit, have derailed the country’s program with the International Monetary Fund which serves as the economic watchdog for the international financial community.

The Estrada government has also decided not to seek a new funding program with the IMF but will merely enter into a post-monitoring program that will not necessitate strict conditionalities.

However, the seal of good housekeeping by the IMF is normally a prerequisite to any ODA, bilateral or multilateral financial assistance.

The Estrada government is having difficulty tapping the international capital market because of the current wide spread on Philippine debt papers.

The latest spread, which has supposedly improved, is still about 585 basis points over the corresponding tenor of US Treasury bonds.

The negative perception of the Philippines stems from its current uncertain political picture which has also prompted international credit rating agencies to downgrade their economic outlook of the country to negative from stable. – Marianne Go