ADB sets aside $1.5B for lending to RP over 3 yrs

The Asian Development Bank (ADB) has endorsed a new three-year strategy for ADB operations in the Philippines under which new lending could range from zero to as much as $1.5 billion, depending on the pace of fiscal consolidation and key sector reforms.

In its executive summary, the Manila-based lending agency said the strategy is based on its cautious response on the changing economic scenario.

The three-year program is considered fiscally-responsive and investor-friendly and that it will only address short, medium, and long-term structural reforms in selected key sectors which include health, water supply, slum upgrading, and microfinance and SME development.

The three-year program recognized the correctness of the government’s six-year Medium Term Philippine Development Program (MTPDP) as well as other poverty-alleviation activities like the Millennium Development Goals (MDG).

The new Country Strategy and Program (CSP) for 2005-2007, under preparation for the past year, is an innovative and flexible approach designed to build on the lessons of the past, better accommodate policy and economic uncertainties, and produce more demonstrable impact in reducing poverty.

ADB’s private sector loans and equity investments, which are provided without government guarantee and thus do not affect the budget, could also be an important element of support over the next three years.

The Philippines is ADB’s largest client for these operations.

Non-lending activities and knowledge transfer will remain to be an important part of ADB’s support to the Philippines. These will include grant assistance for preparing new projects and for capacity building and knowledge sharing in agriculture, health, slum upgrading and services for the poor, microfinance, strengthening anti-money laundering activities, public debt risk management, and management for development results.

The country’s three-year scale average lending levels showed a decline from $505 million during 1996 - 1998 to only $146 million during 2002-2004.

Likewise, roughly 90 percent of public sector lending during 2001-2004 was off budget through government owned and controlled corporations (GOCC) and government financial institutions (GFIs).

"The fall and shifts in lending commitments is explained by: low absorptive capacity, especially due to the growing fiscal constraint, the slower-than-expected pace of policy reforms: and a low quality portfolio and the overhang of implementation problems affecting opportunity for new loans," the program explained.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members, with 45 from the region. In 2004, it approved loans and technical assistance totaling $5.3 billion and $196.6 million, respectively.