Gov’t taps multilateral use of loans for reconstruction

MANILA, Philippines - The government will dig into the emergency loans that multilateral funding agencies are offering for the recovery and reconstruction of the devastated provinces of Eastern Visayas, mainly Leyte and Samar.

Socio-Economic Planning Secretary Arsenio   Balisacan said dipping into the emergency loan basket would not require government to restructure its lending program, nor will it create a serious impact on the fiscal deficit.

He wants to increase the share of infrastructure spending of three percent of gross domestic product (GDP) next year to at least 3.5 percent.

“That is roughly P60 billion more,” he said.

The amount of soft loans will depend largely on the recovery, rehabilitation and restructuring plan to be released within three weeks.

The plan will depend on the immediate collation of data and information directly related to the damage of Typhoon Yolanda. 

The National Economic and Development Authority (NEDA) has been assigned to lead    an interagency task force to craft the plan.

It will concentrate on immediate and near-term actions needed to rebuild facilities, restore social services and revive economic activities.

The plan, to be presented to President Aquino next month, will be implemented immediately following sustained relief operations in affected areas.

“We have received many offers of emergency loans – soft loans, which could be used to get rehabilitation and reconstruction funded quickly, or right after the first phase of response (relief) to the crisis. The second phase is recovery, rehabilitation and reconstruction,” Balisacan said.

The Asian Development Bank (ADB) extended a $223-million grant and offered a $500-million emergency loan. The World Bank likewise dangled a similar $500-million emergency loan.

Balisacan said using the emergency loans would keep the Philippines from  tapping into the commercial debt market, which charges higher interest rates than emergency loans.

If the loans would result in an increase in the country’s fiscal deficit, “the market will understand,” he added.

It helps that the country’s macroeconomic fundamentals are strong, allowing the Philippines’ good fiscal space.

“We don’t have to worry about sourcing the funds, but rather in deploying the large amount of funds for reconstruction,” Balisacan said.

The damage brought about by Yolanda and its impact on the economy will not change the country’s positive credit ratings. Nor does government feel it would erode the GDP growth forecast of seven percent this year.