LBP asked to shoulder guarantee fee in SRP loan

CEBU, Philippines - The Cebu City Council has requested the Land Bank of the Philippines to assume the one percent guarantee fee of the city's outstanding loan balance with the Japan Bank for International Cooperation.

 The city government is obligated to pay the national government one percent of its loan balance as guarantor. At present, the city has an outstanding balance of P2.9 billion based on the prevailing foreign exchange rate.

Cebu City was granted P5.6 billion loan by JICA to undertake the 300-hectare South Reclamation Project. So far, it has only paid P2.66 billion. The loan will mature in 2025.

Councilor Margot Osmeña, chairperson of the committee on budget and finance, said that the outstanding loan balance does not include the interest that the city government is paying.

The LBP' through its assistant vice president and Cebu Lender Center head Elsie Fe Tagupa, offered to buy out the city's loan with JICA. By allowing the LBP to pay the city's remaining loan balance, the bank management agreed to assume the one percent guarantor's fee for the national government.

The proposal would allow the city government to save P1.1 billion in guarantee fees. The members of the City Council earlier discussed the possibility of converting the foreign denominated loan into peso to free the city government from ballooning guarantee fees due to foreign exchange rate loss.

Among the solutions seen by the councilors is to allow a local bank to restructure the loan for the city government.

Mayor Michael Rama, however, said the city must not only consider the LBP proposal but the proposals from other credible banking institutions as well.

"Remember there are other offers. We have to hear them to be fair. LBP came in when other offers crop up," Rama said.

 Other interested banks include Development Bank of the Philippines and Philippine National Bank. "Let the best offer wins," Rama added.

The measure, which was approved en masse yesterday, was authored by Councilors Osmeña, Eugenio Gabuya Sr., Mary Ann Delos Santos and Nenell Hanz Abella.

Vice Mayor Edgardo Labella has urged his colleagues in the City Council to make an "in-depth study" on the SRP issues in order to settle on "the best steps to take".

"Let us do our homework. Let us invite experts to speak to us, educate us and maybe encourage us to push for what's best. It is an exciting time to explore ideas. Many new strategic minds, new leadership styles, new ideologies, new approaches, are sprouting out in the open," Labella said in a privilege speech. — (FREEMAN)