IMF, WB hint of difficulty in getting new loans for RP

The country’s major creditors, the International Monetary Fund (IMF) and the World Bank (WB), hinted yesterday that the Arroyo administration will have difficulty acquiring new loans this year unless it accelerates the utilization of official development assistance (ODA).

In the first meeting of the Arroyo administration’s economic managers and representatives of the donor community led by the IMF and WB, Vinay Bhargava, WB country director, said that while multilateral lenders support the efforts of the Philippines to revive its economy, he warned that further economic support in terms of new funding won’t be forthcoming if the ODA portfolio performance is not improved.

"It does not make sense to be talking about new loans and going into new loans if the government will just keep paying commitment fees," Bhargava said.

Because of problems in the implementation of ODA-funded projects, President Arroyo has ordered her economic managers to conduct a thorough review of foreign loans and ODAs which carry "onerous conditionalities" for possible scrapping.

As a result, government has delayed its availment of the 24th Yen Loan Package from the Japanese government pending the evaluation of the project to be funded by the loan.

As the government attempts to free up scarce funds tied up by inefficient projects funded out of ODAs, government planners are reluctant to accept new loans for new projects until it has sorted out mounting cost overruns due to low absorptive capacity.

Government has been forced to cancel loans and forego development assistance as it struggles to contain its ballooning fiscal deficit and at least trim it down from the projected P223 billion to P146 billion.

One of the biggest casualties were ODA- funded projects with large costs overruns because they tie up funds that could otherwise be used for other more critical projects that need funding.

Canceling the assistance altogether would free up government funds that the ODA normally require. Government is also trying to save on commitment fees that it would otherwise have to pay whether it uses the loan proceeds or not.

Budget Secretary Emilia Boncodin admitted that the implementation of ODA-funded foreign assistance projects (FAPs) has been slow because of inefficient counterpart funding as well as the ill-preparedness of implementing agencies.

Last year, government allocated about P45.6 billion in counterpart funding out of its P48.2 billion programmed ODA funds. Of this amount, Boncodin said only about P29.5 billion was utilized.

Socioeconomic Planning Secretary Dante Canlas said the move to scale down ODA projects aside from saving government money, will also allow government to focus on existing projects that have not yet been completed.

A number of ODA portfolio reviews conducted in recent years by foreign donors to determine problems in completing projects showed government was hampered by the lack of readiness on the part of implementing agencies to undertake projects on time; the agencies’ weak implementation capacity; delay in the procurement of materials and inadequate financial expertise on the government’s part.