The Philippines secured a total of $1.25 billion in loans from two multilateral lenders last Thursday (May 28), filling its war chest in the fight against COVID-19.
The China-led Asian Infrastructure Investment Bank (AIIB) approved $750 million, part of a co-financing arrangement with the Asian Development Bank (ADB) for the Philippines’ $2.25-billion COVID-19 active response and expenditure support (Cares) program.
In April, the Manila-based ADB approved a $1.5-billion counterpart loan for the Cares program.
In a statement, the AIIB said the loan for the Philippines’ COVID-19 response will be used to increase testing capacity, help vulnerable sectors that included agriculture and fund conditional cash transfers and emergency aid to the poor.
AIIB added that the loan would fund wage subsidies that would also benefit at least 1 million micro, small and medium-sized enterprises (MSMEs) of which more than half, or 58 percent, are registered to women.
“The Philippines is one of the first developing countries globally and the first in Southeast Asia to have introduced strict quarantine measures to limit the spread of the disease,” AIIB said.
“The lockdown measures are expected to take a heavy toll on the country’s economic growth with the International Monetary Fund (IMF) estimating that gross domestic product (GDP) could see a sharp contraction from 6.2 percent to 0.6 percent for 2020,” AIIB noted.
“The focus of our efforts is to help the government tackle the immediate health and economic challenges posed by the pandemic,” the Beijing-based lender said.
“The AIIB’s support will contribute to building economic resilience and ensuring quick recovery,” said AIIB vice president for investment operations D.J. Pandian.
Prior to the COVID-19-related loan, the Philippines had borrowed from the AIIB only once—$500-million in 2017 for the Metro Manila Flood Management Project, which was also co-financed by the World Bank.
Relatively new in the game, AIIB’s lending rates are higher than those of World Bank and ADB.
The Washington-based World Bank’s board of executive directors also on May 28 approved the $500-million Philippines Emergency COVID-19 Response Development Policy Loan.
The World Bank said its third COVID-19-related lending for the Philippines will “provide social assistance to 18 million poor and vulnerable Filipinos badly hit by COVID-19.”
World Bank added that the loan would also fund monthly cash transfers to 4.3 million beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps), expanding assistance to 13.6 million who are not covered by 4Ps and support for migrant Filipino workers displaced from their jobs abroad and who had returned to the Philippines.
World Bank said the loan would also help fund government programs for MSMEs in the form of two-month wage subsidies, relief in the form of tax deferrals and social security payments and credit lines to help business operations continue and preserve jobs.
“The COVID-19 pandemic has badly hurt millions of poor and vulnerable Filipino families, particularly daily wage earners,” World Bank said.
“This new financing can help with the delivery of financial support for struggling families and communities while the country is ramping up efforts to contain the pandemic and reduce its economic impact,” said World Bank acting country director for Brunei, Malaysia, the Philippines and Thailand Achim Fock.
World Bank quoted Finance Secretary Carlos G. Dominguez III as expressing gratitude for “prompt action on this financial support for the Duterte administration’s efforts to provide immediate relief to poor and low-income Filipinos plus small business workers who lost their income as a result of work stoppages induced by the coronavirus pandemic.”
“This swift loan approval underlines the strong international confidence in the government’s capability to meet the massive financial requirements of containing this global health emergency,” Dominguez said, according to the World Bank.
Prior to the two loans, the Philippine government as of mid-May already borrowed from foreign lenders and secured grants worth a total of nearly $5 billion to address the health and socioeconomic crises caused by the COVID-19 pandemic.
As the government ramps up borrowings to fund response to COVID-19, the Cabinet-level Development Budget Coordination Committee’s (DBCC) this month projected the national government debt stock to reach a record-high P9.589 trillion or 49.8 percent of GDP by end-2020.
Dominguez had said the government will borrow an additional P436.9 billion from foreign lenders to augment funds under the Duterte administration’s four-pillar socioeconomic strategy against COVID-19.
Besides borrowing from multilateral lenders such as ADB, AIIB and World Bank, the Philippines is also in talks with China, France, Japan and South Korea for bilateral loans for COVID-19 response, Dominguez had said.
Edited by TSB
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