MANILA, Philippines - The Philippines and the government of Italy have entered into a debt-for-development swap agreement that would pave the way for the conversion of Manila’s loans to the European republic into funds for development projects in the country.
The agreement, signed by Finance Secretary Cesar Purisima and Italian Ambassador to the Philippines Luca Fornari last month will run for about five years, the Department of Finance announced yesterday.
Under the deal, the Philippines’ total outstanding loan with the Italian government amounting to P158 million including interest will be converted to fund eligible development projects.
These projects will be jointly agreed and selected by both governments, Finance Undersecretary Rosalia de Leon said.
Proceeds from the debt swap deal will be used to fund development projects or those that promote poverty reduction, socio-economic sustainability and environmental protection.
As part of the Italian government’s thrust of promoting biodiversity conservation, the fund will also prioritize projects in this area.
The target areas are provinces with the highest poverty rates in the country and the eligible recipients of the funding are government agencies as well as local government units.
Also eligible to receive funding are local community-based organizations in the field of development and environment protection and Philippine and Italian civil society organizations.
“A management committee composed of the representatives of the Philippine and Italian governments, through the Department of Finance and the Italian Embassy in Manila, respectively, will lead the implementation of the agreement, including issuance of call for proposals/ implementation arrangements, selection and approval of projects,” the DOF said.
The debt-for-development agreement with Italy is part of government efforts to manage its debts. Other debt liability management initiatives include a planned local debt swap to lengthen maturities and the issuance of peso-denominated global bonds, which would convert the government’s debt into the local currency.
This, in turn, would help cushion the economy from foreign exchange fluctuations.