Government seeks $600-M World Bank loan

The government will push for a new $400-million to $600-million Public Sector Reform Loan (PSRL) with the World Bank this year.

Newly installed Finance Secretary Jose Isidro Camacho said the government will sit down soon with the WB to begin negotiations for the PSRL which will replace the Banking Sector Reform Loan (BSRL) expiring this month.

The remaining $400-million BSRL was cancelled by the Department of Finance (DOF) because government could not comply with a major conditionality – the privatization of the Philippine National Bank (PNB).

"We will try to have a deal this year, although the drawdown of the loan might not be forthcoming until next year," Camacho said.

He added that disbursement of the PSRL this year is not necessary since government already arranged for a $500-million foreign financing through private placements that will take care of government’s major financing requirements this year.

Camacho said the government this time around, will only commit to conditionalities that it can achieve, unlike the BSRL wherein government had no control over legislative matters.

The privatization of the PNB as well as the legislation of the anti-money laundering bill and the strengthening of the charter of the Bangko Sentral ng Pilipinas were some of the conditions imposed by WB and co-financier Japan Bank for International Cooperation for the release of the second tranche of the BSRL.

The $600-million BSRL was approved in 1998 and an initial $200 million was already disbursed to the government.

The full privatization and rehabilitation of PNB has been stalled several times, especially now that government junked its plan for a joint sales of its remaining stake in the bank with majority owner, tycoon Lucio Tan. Instead, government wants to regain control of the bank through a "reverse privatization" that will have government raising its stake in PNB through a debt-to-equity scheme.

On the other hand, the passage of the anti-money laundering bill was put off with Congress still to resume regular sessions after last month’s elections.