BSP APPROVES 2 PROGRAM LOANS FROM WB WORTH $310M
MANILA, MAY 8, 2006 (STAR) By Des Ferriols - The Bangko Sentral ng Pilipinas (BSP) has approved two program loans from the the World Bank amounting to a total of $310 million and marking the return of program loans into the country since the government’s fiscal crisis broke out in 2002.
The Monetary Board in its executive meeting over the weekend approved two program loans – one for health programs of the Department of Health amounting to $110 million and the other for basic education amounting to $200 million.
The WB has not extended a program loan to the Philippines since late 1990s when the government started incurring huge budget deficits resulting from uncontrolled spending and declining revenues.
BSP officer in charge Diwa Guinigundo said the loan would come from the WB’s International Bank for Reconstruction and Development (IBRD) with the National Government as the sovereign borrower.
The $110-million health program package would be used for the national sector support for health reform of the DOH while the education package would be used for the national program support for basic education of the Department of Education (DepEd).
Guinigundo said the loans were approved in principle and final approval would be made once the NG and the WB concludes on-going negotiations that would define the terms and conditions of the loan.
"This is significant because it means we are back in the radar of official development assistance (ODA) donors," said Finance Undersecretary Gil Beltran. "We have not been able to do this for a long time because of our budget deficit problems."
According to Beltran, the conditions under discussion with the WB were hurdles already achieved by the government when it started consolidating its fiscal position to reverse the decline in revenues and soaring budget deficit.
"All we have to do now is to continue meeting the fiscal targets and the tax administration goals we have already set for ourselves," Beltran said.
The WB, in particular, has already said it was considering more program loans possibly for improving the government’s tax administration and collection.
The WB said during the Philippine Development Forum last March that the resumption of its program lending to the Philippines was triggered by significant improvements in the country’s public finances which has fallen into disarray after years of declining revenue collection.
WB country director Joachim von Amsberg told reporters earlier that the resumption of policy lending to the Philippines was a "seal of good housekeeping" after the government was able to reverse the trend of plummeting revenues and soaring budget deficit.
The WB this year co-chaired the 2006 Philippine Development Forum (PDF)where the country’s multilateral and bilateral donors congregated together with legislative, executive and private sector leaders.
At the conclusion of the PDF, Von Amsberg said that while no specific amounts have been discussed along official lines, the policy loan was likely to go to a policy program that would tighten the government’s tax administration capabilities and spending discipline.
The policy loan, Von Amsberg said, would address the long-term measures that would be required to re-engineer tax administration and the revenue collection agencies themselves.
"We haven’t extended policy loans to the Philippines in seven years but now we are going to do it based on our assessment that substantial undertakings have been made that added up to this fiscal turnaround," said Von Amsberg.
Unlike project loans which are granted for specific projects, policy loans are concessional loans whose proceeds go into the general budget as budget support.
However, policy loans carry policy reform conditions that have to be met by the government over a very specific time period. Policy loans are used to defray the adjustment costs that attend more serious policy conditions imposed by the donor agency.
Chief News Editor: Sol Jose Vanzi
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