CEBU, Philippines - The Bangko Sentral ng Pilipinas has approved the prepayment of the P2.3 billion outstanding loan balance of Cebu City from the Japan Bank for International Cooperation which was used to finance the 300-hectare South Reclamation Project in 1996.
Rosalina Tan, officer-in-charge of the BSP International Operations Department, informed Mayor Michael Rama through a letter dated November 25 that the Monetary Board has already issued a resolution on November 13 granting the prepayment of the loan.
“The foregoing approval is based solely on BSP’s evaluation of the request considering existing policies and procedures as well as documents/information submitted and representations made by CCG (Cebu City Government). Any deviation from the facts disclosed shall render the decision of the Monetary Board null and void,” Tan said.
With the approval of BSP, the city government only lacks the approval of Japan International Cooperation Agency and the passage of the P2.8 billion Supplemental Budget-1 this year, which includes the P2.3 billion prepayment fund.
In 1996, the city government entered into an agreement with JICA for the Y12.315 billion or around P4.65 billion loan to finance the reclamation project that is now as the South Road Properties. As of now, the city still owes JICA over P2.3 billion and is supposedly due in 2025.
But, BSP has set conditions before the city could engage in the prepayment of the loan.
“Foreign exchange purchases for the prepayment shall be made on staggered basis from date of Bangko Sentral ng Pilipinas’ (BSP) letter-authority up to actual prepayment date, with purchases not exceeding US$30 million per day,” Tan said.
She said the city has pending balance of 5.996 billion Yen or approximately US$48.7 million, adding that the city should limit on the foreign exchange purchases that the city can make in a day to pay off the loan in Japanese Yen.
City Legal Officer Jerone Castillo said the city government needs to buy currency since the SRP loan is in Yen. Automatic conversion is not allowed.
Tan said the limit is only US$30 million and the city’s balance is at US$48.7 million. This would mean that the city should pay the full amount in two tranches.
BSP asked the city government to comply all the conditions set by City Resolution No. 13-0469-2015 dated August 26 which authorized Rama to prepay the loan; the Bureau of Local Government Finance letter dated September 26; and all pertinent laws and regulations, as well as orders, decisions, judgment, decrees issued by pertinent departments/agencies of the government or tribunals.
“After the prepayment, CCG shall submit the following to the BSP, through the International Operations Department, within five banking days from transaction date; copies of notice of prepayment to the Land Bank of the Philippines, and Proofs of prepayments made,” the letter read.
In his regular press conference yesterday, Rama distributed copies of the BSP letter to the media.
“As far as I’m concerned, the case has been won. Second, naa bay mamayad ug utang nga balibaran?” he said.
Rama is set to meet with the Local Finance Committee for the next step. The mayor said that the members of the City Council should know what to do as the court has already dismissed the civil case filed against them questioning the sale of the SRP lots.
The city got P8.35 billion from the developers that won in the public bidding in August. Part of the SRP proceeds was identified as the source of fund in the stalled P2.8 billion SB-1 which contains amount needed for the prepayment.
The majority bloc of the City Council has deferred the approval of the SB-1 because of the case filed by Romulo Torres.
“Now that everything has been put clearly in table and if the council still will be obstinate, stubborn and then showing continuing ignorance, then showing continuing insensitivity, much less with impunity, absence of urgency, what would it depict? I don’t have to state the obvious,” Rama said.
He said the City Council should do their part as the city’s executive department has exhausted all remedies for the prepayment.
Apart from the concurrence of BSP, other requirements for the committee are certification from the Bureau of Local Government Finance that the transaction is within the city government’s debt servicing limit; justification for the prepayment to the Monetary Board; concurrence from the Department of Finance as well as from the Land Bank of the Philippines; concurrence from JICA, and the concurrence of the City Council.
As of now, the city has secured BLGF’s and DOF’s approval, and verbal approval from the Monetary Board. It lacks the concurrence of JICA and the approval of the budget.
Rama has already sent communication to JICA for its concurrence and to waive the P43 million prepayment fee. However, JICA said the Land Bank of the Philippines, as conduit, should be the one to request for the prepayment. (FREEMAN)