The BSP said it approved in principle an $11-million program loan to bankroll the National Program Support for Tax Administration Reform of the BIR.
Also approved was an $83.75-million loan to finance the Second Mindanao Rural Development Project of the Department of Agriculture specifically for countryside development in specific areas in Mindanao.
BSP Governor Amando M. Tetangco Jr. said over the weekend that both loans were approved in principle by the Monetary Board and the National Government could now start finalizing the loan agreement with the IBRD.
According to Tetangco, both loans carried a maturity period of 20 years including an eight-year grace period. The interest rate was pegged against the LIBOR with a fixed spread of 0.5 percent.
IBRD is one of the five institutions that make up the World Bank which has decided early last year to resume full official development assistance to the Philippines, including program and policy loans that provide general budgetary support without the severe and specific limitations of project loans.
The WB earlier said its main focus would be financial assistance for improving tax administration and collection, saying that that the resumption of its policy lending to the Philippines was triggered by significant improvements in the country’s public finances which has fallen into disarray after years of declining revenue collection.
The WB last year co-chaired the 2006 Philippine Development Forum (PDF) held in Tagaytay City where the country’s multilateral and bilateral donors congregated together with legislative, executive and private sector leaders.
At the conclusion of the PDF, WB said its support is likely to go to policy program that would tighten the government’s tax administration capabilities and spending discipline.
Unlike project loans which are granted for specific projects, policy loans are concessional loans whose proceeds go into the general budget as budget support.
However, policy loans carry policy reform conditions that have to be met by the government over a very specific time period. Policy loans are used to defray the adjustment costs that attend more serious policy conditions imposed by the donor agency.
The WB said the donor community saw how critical tax administration would be for sustaining the fiscal consolidation and increased public spending for development and basic services.
The objective of improved tax collection, the WB said, was to set in motion a cycle of improved public finances, better public services and growth, and more rapid social progress with poverty reduction as the result.