BSP okays $20-M US PL 480 loan for AFMA budgetary support

The Bangko Sentral ng Pilipinas (BSP) has approved the $20-million commodity loan from the US under Public Law 480, known as the US Farm Bill.

The BSP said over the weekend that the loan was approved by the Monetary Board that the National Government intends to use as budgetary support for the Agriculture and Fisheries Modernization Program AFMP.

BSP Governor Amando M. Tetangco Jr said the commodity loan involved the importation of 69,000 metric tons of rice from the US which would then be sold and monetized by the Department of Agriculture through the National Food Authority as the implementing agency.

The proceeds of the commodity loan, Tetangco said, would be plowed back into the DA budget to support the AFMP as prescribed under the Agriculture and Fisheries Modernization Act.

Agriculture officials projected earlier that rice importation would decrease this year following an increase in rice production during the first semester of the year.

In 2006, the government imported a total of 1.65 million metric tons of rice and for 2007, the NFA said rice imports would be around 1.61 million metric tons.

Rice importation has become a critical element in controlling inflationary pressures, easing demand-side pressures that could threaten the prices of basic commodities, especially food.

The Arroyo administration is planning a P325.57-billion borrowing program in 2008 as it attempts to tap more funding from the US Millennium Challenge Account.

Finance officials announced earlier that the government’s borrowing program for 2008 would be 16.7-percent lower than its borrowing program for this year.

The national budget is scheduled to break even in 2008 but the Department of Finance (DOF) said the government needs to continue borrowing to roll-over its maturing obligations.

The finance department said 70 percent of the 2008 borrowing program, equivalent to P228.06 billion, would be raised from the domestic credit market.

The remaining 30 percent, equivalent to P97.7 billion or $1.99 billion, would be borrowed from the foreign market in a combination of commercial borrowing and official development assistance.

On the other hand, $1 billion of the 2008 foreign borrowing program would be raised from the overseas commercial market. Although the government could opt for commercial loans, it has a preference for issuing commercial bonds to overseas markets.

The remaining $990 million would come from multilateral and bilateral sources of official development assistance (ODAs) to fund specific programs of the government.

ODA borrowing for 2008 was further broken down into $500 million worth of project loans—ODA financing that were earmarked for specific projects with specific objectives.

On the other hand, the remaining $490 million would be raised in the form of program loans—these are loans extended usually by multilateral funding agencies for general budget support with no specific projects outlined.