Finance Secretary Margarito Teves told reporters yesterday that the government is working out the policy loan with the WB in line with the WB’s commitment to provide official development assistance to the Philippines of up to $1.8 billion over a three-year period.
"Our fiscal consolidation is on track and once we have shown that we can sustain this trajectory, it will be easier for us to work out official development assistance," Teves said.
He added that the policy development loan is also being worked out with the ADB for possible co-financing.
The loan would be used purely for budgetary support and need not involve specific and targeted funding, giving the government significantly more flexibility than project loans, Teves said.
The Bangko Sentral ng Pilipinas has approved two program loans from the WB amounting to a total of $310 million, marking the return of program loans into the country since the government’s fiscal crisis broke out in 2002.
The WB has not extended a program loan to the Philippines since the late 1990s when the government started incurring huge budget deficits resulting from uncontrolled spending and declining revenues.
Yesterday, the WB also signed a grant for the preparation of the National Sector Support for Social Welfare and Development as well as the KALAHI Comprehensive and Integrated Delivery of Social Services Project.
The WB earlier this year announced it will resume its policy lending to the Philippines for the first time in seven years, possibly extending financial assistance for improving tax administration and collection.
The WB said the resumption of its policy 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.
The WB this year co-chaired the 2006 Philippine Development Forum (PDF) held in Tagaytay City where the country’s multilateral and bilateral donors congregated together with legislative, executive and private sector leaders.