ADB lends RP $650M for power, financial sectors

The Asian Development Bank (ADB) has granted a $650-million budgetary loan to the Philippines, the highest level it has given the country in eight years or since the outbreak of the Asian financial crisis.

In a press conference at the ADB head office in Ortigas yesterday, ADB vice president C. Lawrence Greenwood said the loan will be broken down into two: $450 million to help stabilize the power situation, while the remaining $200 million will be for the development of a more efficient financial sector.

However, Greenwood said since the loan is budgetary aid, the government may opt to use the funds in their chosen projects. "It doesn’t have to be for power … they can use it in anyway … it is not earmarked," he explained.

But the ADB official proposed that the National Government allot the $450 million for restructuring the power sector, a crucial ingredient for the improvement of the country’s fiscal imbalance and investment climate.

"Without a stable and reliable electricity supply, industry will not grow and generate the employment needed to decrease poverty … the country could be facing power outages, decreased economic growth and higher electricity rates if the reforms envisioned under this program are not pursued," Greenwood noted.

ADB warned that the country may experience a power crisis if reforms are not undertaken. Currently, the National Power Corp. (Napocor) is saddled with an $80-billion debt. Greenwood said the funds, which will be released next week, can be used to further support the government’s absorption of Napocor’s debt.

Meanwhile, the $200-million assistance to the financial sector will help the government in its attempts to broaden and deepen the financial system, strengthen governance in the non-bank financial subsector, and improve efficiency in the securities market.

The program consists of back-to-back subprograms. The first subprogram is the subject of the loan extended while the next will be supported by another loan, approval of which is already being studied by the ADB directors.

"This program supports the government’s reform agenda by reducing financial sector vulnerabilities and systemic risks, diversifying financial channels, enhancing transparency, and improving market efficiency," Greenwood said.

"This is a path to increased economic growth for the Philippines," he added.