MANILA, Philippines - The central bank has cleared loans of up to $94 million from the Japanese government to provide budgetary support for the Arroyo government’s fiscal reforms.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said yesterday that the Monetary Board has approved the loan in principle, paving the way for the National Government to start negotiating the specific details of the loans.
Tetangco said the loan would be denominated in Japanese yen, amounting to a total of ¥9.3 billion, equivalent to roughly $94 million. He said it would come through the Japan International Cooperation Agency (JICA).
According to Tetangco, the JICA loan would co-finance the government’s development policy support program intended to defray the budgetary impact of the ongoing fiscal reforms in terms of revenue collection, management and public spending.
Tetangco said the initial terms of the loan agreement indicated that it would be a 30-year loan including a 10-year grace period with an interest rate of 1.4 percent per annum.
The JICA loan would also be covered by a 0.1 percent commitment fee based on the undisbursed portion of the proceeds. A commitment fee discourages the borrower from letting the fund sit too long without actually utilizing it for the purpose it was borrowed.
The JICA loan formed part of the government’s official development assistance (ODA) borrowing program which represents over half of the country’s foreign borrowing plan.
Also this year, the government is waiting for the approval of other Japan-funded loans amounting to up to P34.241 billion that would be included in the 27th yen loan package.
Data from the National Economic and Development Authority (NEDA) showed that these loans included the P20.12-billion Infrastructure Logistics Assistance Facility, or the Logistics and Infrastructure Assistance Facility (Linaf); the P4.521-billion Project on Forestland Management (ProFORM); and the P9.6-billion Support Program for Agri-Enterprise Development (Spaed).
The Linaf and the Spaed would be implemented by the Development Bank of the Philippines, while the ProFORM would be implemented by the Department of Environment and Natural Resources (DNER).
Japan has only recently resumed granting concessional loans to the Philippines after deciding to close the spigot in the wake of disagreements related to the application of the value-added tax on Japanese contractors.
NEDA is still reconciling the VAT payments supposedly owed by Japanese contractors but in the meantime, Japan has agreed to reopen its ODA assistance to the country.