CEBU, Philippines - The Cebu City Council is expected to discuss today in an executive session a proposed buyout of the P3-billion outstanding balance of the P5.6-billion it borrowed from the Japan Bank for International Cooperation in 1997 to develop the South Road Properties.
While the city has already paid a total of P6.8 billion, which is already bigger than the original SRP loan, it still owes JBIC P3 billion, which should be paid on or before August 15, 2025.
The bulk of what the city has paid so far has gone to interest payments and the national government’s share termed as “guarantee or commitment fee.”
City Treasurer Diwa Cuevas, City Administrator Lucelle Mercado and officials from Land Bank of the Philippines, which serves as conduit bank for the loan, will join City Council members in the session.
“We have to be apprised of what would be the scenario if the city government will take a loan from LBP to pay its remaining obligation with JBIC,” said City Councilor Noel Eleuterio Wenceslao, vice-chairman of the council committee on budget and finance.
He said the proposal is an “alternative and better option” especially if the sale of SRP lots would not materialize.
Wenceslao said the city’s loan amortization payment had been eaten up by interest payments and exchange rate fluctuations.
Since the city took out a loan in yet, its payment, made in pesos, has to be converted to dollar and then to the yen currency.
The city has already paid a total of P6.8 billion inclusive of the national government’s guarantee or commitment fee amounting to P546.36 million.
Wenceslao said the proposed buyout would also end the “agony” of the city in paying the interest in the guarantee fee to the national government.
“This is advantageous for the city since the yen-denominated loan would no longer be converted to dollar then peso but automatically yen to peso. We have to restructure our loan to be free from (the huge) interest and commitment fees,” he said.
“The difference between the amount paid and the decrease in the principal amount was entirely due to the fluctuations in currency valuation that had greatly affected the guarantee or commitment fee and interest,” he added.
Lawyer Jose Daluz III, the mayor’s executive assistant and former City Council committee on budget chairman, said the loan restructuring plan has been tackled to address the loan interest rate fluctuations.
Daluz explained that the city pays 11 percent of the loan amortization loan to LBP for its being the conduit bank for the loan.
He said a loan also with LBP, the Philippine National Bank, and/or other banks would mean that the city would only be paying at least five percent in interest rate.
The city sets aside approximately for the SRP loan P300 to 500 million a year, P150 million to P200 million of which is for the interest to the conduit bank.
Councilor Gerardo Carillo, however, opposed to the idea, saying the buyout would only bring “additional burden to the city.” (FREEMAN)