As of last September, the government’s budget deficit stood at P166.4 billion and some economists estimate that the full-year figure could go past the P180-billion mark, well over the target of P130 billion.
Thomas Crouch, ADB Philippine country office director, said that the bank is concerned that the Philippine government will not be able to raise counterpart funding for program or projects loans.
It is a common practice among official development assistance (ODA) agencies to require borrowers to put up counterpart funds for loans that are granted under soft or concessional terms.
Crouch said they have held several meetings with government representatives on the fiscal situation of the Philippine government in line with ongoing and planned loan programs.
The Philippines is to get up to $815 million in loans from the ADB over the next three years to fund infrastructure and anti-poverty projects, the bank said yesterday.
The loans are also aimed at promoting equitable growth, improving basic services, promoting good governance and encouraging sound environmental management, the bank said.
"ADB proposes to lend $815 million to the Philippines over the next three years for infrastructure and pro-poor projects," a statement from the ADB headquarters in Manila said.
However, it said the actual lending level will depend on the government’s fiscal position and the ability to carry out the projects.
"We expressed concern that the poor fiscal situation of the government could not only have a negative impact on the country’s ability to raise counterpart funds. The bank is also concerned over the ability of the government to deliver or implement the ongoing projects," the ADB director said.
In the past few days, the ADB and representatives of the Arroyo administration have been holding consultations regarding the worsening fiscal deficit. "We have discussed ways on how to stop it and how to correct the growing deficit."
Also recently, the ADB had been reviewing its Philippine portfolio, which is the fourth largest in Asia.
"We were looking at program loans that may be partially canceled or deferred, and we were also looking at programs or projects that could be surgically removed from the portfolio," Crouch pointed out.
Delayed implementation of the various program loans has resulted in unnecessary losses due to huge commitment fees paid by the Philippines.
Last year, the Philippines paid a total of $7 million in commitment fees which are normally deducted from the actual amount set for funding of the particular project. So far, commitment fees have reached $6 million this year.
The country is notoriously known for its inability to immediately implement program loans. It has a 12-percent disbursement ratio or roughly translated, it takes the country over eight years to implement a program loan which other member nations can complete in three to five years.
As of presstime, the ADB "dropped" five program loans worth a combined $265 million for various reasons ranging from continued delays in its implementation to "a change of heart by the host country or the lead government agency."
The five "dropped" lending program were: the Rural Electrification (Department of Energy); the PNR South Rail Project (Philippine National Railway/Department of Transportation and Communication); Upland Communities Development (Department of Natural Resources)); Strengthen Transmission System for Rural Electrification (Department of Energy); LGU Infrastructure Development Facility (Land Bank of the Philippines).
Still in the pipeline with partial loan releases due to delays are the Power Sector Reform Program (PSRP), Grains Sector Development Program (GSDP), Metro Manila Air Quality Improvement Program (MMAQIP), and the Pasig River Environment Management and Rehabilitation Program.
Meanwhile, Crouch confirmed that the third tranche of the PSRP worth $100 million would likely get the nod of its board after the Nov. 13 meeting. The total amount of the PSRP is $300 million with a counter part package from the Japan Bank of International Cooperation (JBIC).
He said "all he prerequisites have already been satisfactorily met the recipients" and that "it was more likely that the board will decide favorably to the release of the third tranche." – With Donnabelle Gatdula and AFP