China-led AIIB eyes peso financing option for infrastructure

MANILA, Philippines — China-led Asian Infrastructure Investment Bank (AIIB) is exploring a possible local currency financing scheme with the Philippines to help fund the Duterte administration’s massive infrastructure program, the Department of Finance (DOF) said yesterday.

Finance Secretary Carlos Dominguez said the local currency financing arrangement was proposed when AIIB officials, led by its president Jin Liqun, met with a high-level Philippine delegation in Beijing last week.

According to Jin, the AIIB is “highly responsive” to the needs of its borrowers, which is why it is open to flexible schemes in extending loans for infrastructure projects.

These include a possible variable spread facility and a local currency financing program.

“We explore other possibilities and we are looking at the possibility of variable interest rate, we are looking at the possibility of local currency financing,” Jin told the Philippine delegation.

Dominguez welcomed AIIB’s proposals, saying these would help the Philippines maintain its low borrowing cost.

“We are quite sensitive to interest rates. Although they may seem small amounts, we do not want to reverse the trend of lowering our spreads. So it is very encouraging that AIIB is considering variable spreads. I was hoping for an update on it. We are happy about the local currency bonds, as well,” Dominguez said.

The finance chief said the AIIB is also eyeing possible co-financing arrangements with other multilateral institutions to fund projects under the Philippines’ Build Build Build program.

Last year, the AIIB extended a $207.603 million loan to the Philippines for the $500 million Metro Manila flood control management project.

The project is co-financed by the World Bank, which will also shoulder $207.603 million of the cost. The Philippine government will provide a counterpart funding of $84.794 million.

The first phase of the flood control project involves the rehabilitation of 36 pumping stations in Metro Manila and the construction of 20 new ones in Manila, Pasay, Pasig, Mandaluyong, San Juan, Caloocan, Valenzuela and Quezon City.

The Department of Public Works and Highways (DPWH) and the Metro Manila Development Authority (MMDA) will implement the project in close coordination with local governments and key shelter agencies. The project is scheduled to be completed in 2024.

In addition, the AIIB has also shortlisted several Philippine projects, including the Pasacao-Balatan tourism coastal highway, and the Camarines Sur expressway for possible financing.