Monetary Board okays $250-million ADB loan for RP's fiscal initiatives

MANILA, Philippines - The Monetary Board has approved a $250-million loan from the Asian Development Bank (ADB) for the government’s policy reform program, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said yesterday.

The $250-million loan is the third in a three-part Development Policy Support Program (DPSP) undertaken by the Tokyo-based multilateral lender to help the Philippines with its fiscal management initiatives.

The first DPSP loan was approved in February 2007 while the second came on board in October 2008,     

Since then, the government has implemented a series of measures to improve the country’s fiscal position. These include an increase in the value added-tax (VAT) rate to 12 percent, from 10 percent previously.

Aside from the VAT measure, the government also implemented trade reforms and synchronized fiscal and monetary policies.

These measures provided funds for increased spending on the social sector and infrastructure in 2007.

The DPSP also includes a set of measures to strengthen the investment climate with focus on reducing red tape, support for infrastructure policy and rural development.

A policy and advisory technical assistance grant of $800,000 is included in the loan to support public expenditure reform initiatives at the Department of Budget and Management.

The government relies on loans from multilateral lenders such as the ADB for the improvement of its fiscal position. It expects the deficit to hit P250 billion this year from the previous program of P199.2 billion.