WB open to 1-year extension of $600-M loan to RP

The World Bank (WB) will consider a one-year extension of the deadline for compliance with the conditions attached to the $600-million Banking Sector Reform Loan (BSRL) if so requested by the Philippine government.

WB country director Vinay Bhargava said "it has always been the policy of the World Bank to consider requests for an extension of any closing loans." He said, however, that the government has to formalize its request and submit this to the WB for review.

"We are open to a discussion but the government will have to justify their reasons for wanting to extend the loan," Bhargava said.

Asked if WB will change any of the conditions, Bhargava said there is no need to amend already agreed upon terms of the loan.

The Philippine government has already received the first tranche consisting of $100 million from the WB and a counterpart amount of $100 million from Japan Bank for International Cooperation (JBIC). The second tranche of $100 million from the WB and an equivalent amount from JBIC was due for release late last year but was withheld because of the failure of the government to comply with the attached conditions.

Under the terms of the loan, the second tranche comes with the following conditions: the complete and full privatization and rehabilitation of Philippine National Bank and meeting the macro-economic targets of government.

"As you can see, there has been no compliance yet," Bhargava said.

Conditions to the third tranche of the loan include amending some provisions of the General Banking Act (GBA) and the New Central Bank Act (NCBA).

The BSRL loan, signed in 1998, consists of a $300-million loan from the WB, the principal creditor, which was matched by another $300 million by JBIC.

Among the conditions set by the creditors was for the National Government to amend the charter of Philippine Deposit Insurance Corp., and incorporate monetary reforms in the NCBA and GBA.

The WB and JBIC also want government to firm up a privatization and rehabilitation plan for Philippine National Bank which is partly owned by the government, and to maintain its budget deficit level target.

So far though, most of these concerns have not been addressed. – Rocel Felix