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Government to tap more ODAs for infrastructure projects

The Philippines will step up the negotiations for official development assistance (ODA) for its massive infrastructure program within the grace period allotted for countries graduating to upper middle income (UMIC) status, according to Socioeconomic Planning Secretary Ernesto Pernia.

The country is currently classified as a lower middle income economy, having a gross national income (GNI) capita of $3,830 as of 2018. By next year, the country is expected to become an upper middle income country with a GNI per capita income range of $3,996 to $12,375.

A three year grace period will be in effect before the country becomes ineligible for concessional loans or borrowings with interest rates that fall below market rates.

Pernia said that as the Philippines and its top ODA partner, Japan, accelerate the processing of assistance for priority infrastructure projects, the government would also reach out more to other development partners to shore up more funds for its ambitious infrastructure program.

“Japan is still willing to lend more funds at very low rates. We are going to be reclassified as an upper middle income country by next year and the downside to that will be less access to concessional loans so we really have to make sure that we finish our major infrastructure projects that are big ticket projects in terms of cost by 2023. Because after that, we will be classified as an upper middle income country,” Pernia said in a briefing on Wednesday.

“We will have to accelerate getting loans. Korea, for example is also an open partner so we shall be getting loans from Korea faster so that we do not hit the deadline which is 2023,” he said.

Through the country’s cooperation with the Japanese government, the Philippines enjoys concessional rates of 0.1 percent for loans at 40 years repayment period under Japan’s Special Terms of Economic Partnership (STEP).

Once the Philippines graduates to UMIC status, however, the Japanese government’s assistance to the country may instead be channeled through other forms of assistance like technical cooperation and assistance to the private sector.

In preparation for the eventual ineligibility for concessional sources of capital, the country will need to improve its credit worthiness to access commercial funding at favorable rates.

“We are also drafting a roadmap so that we get an A credit rating hopefully by 2022. So this means it will reduce the cost of capital. We will no longer qualify for concessional loans by 2023, but this means we will have to access more of the commercial loans,” said Rosemarie Edillon, NEDA undersecretary for policy and planning.

“So it’s really important that we stay the course especially with respect to the reform agenda in the revenue and expenditure management side and more importantly on the infrastructure spending so we will increase the country’s competitiveness,” she added.

Undersecretary for Regional Development Adoracion Navarro said having greater access to commercial capital would also encourage more investors to pursue public-private partnerships (PPP) at the local government level.

“It will also bode well for our projects in the regions, including PPP, because with the lower cost of capital in the commercial market, more private sector partners will be able to pursue developmental projects,” he said.

Source: https://www.philstar.com/business/2019/12/20/1978325/government-tap-more-odas-infrastructure-projects


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