Japan extends P23.5 billion loan to Philippines

To fund coronavirus response efforts

MANILA, Philippines  — The Philippines has secured a  loan of 50 billion yen (P23.5 billion) from the Japan International Cooperation Agency (JICA) to augment funds for the government’s coronavirus disease 2019 (COVID-19) response efforts.

Finance Secretary Carlos Dominguez, on behalf of the Philippine government, and JICA chief representative Eigo Azukizawa signed the loan agreement for the COVID-19 Crisis Response Emergency Support (CCRESL) yesterday at the DOF’s main office in Manila.

Japanese Ambassador Koji Haneda said the Philippines is the first country to receive financing support from this JICA facility.

“The loan we signed today was launched to help developing countries in augmenting their COVID-19 response programs and pump priming their economies. We are proud to say that the Philippines is the very first recipient of this highly concessional loan specifically designed by the government of Japan to address the global COVID-19 crisis,” he said.

Dominguez said the loan would help the government cover its funding requirements amid a widening budget deficit brought about by the COVID-19 pandemic.

“We cannot understate the importance of this particular emergency support loan. As you may now know, our deficit-to-GDP ratio will more than double this year as tax collections are down, even as the government spends more to beef up the health care system, provide relief to families, workers and other sectors hardest hit by the pandemic. We also need to fund our economic recovery program,” Dominguez said.

“This facility will help us cover our budget expenditures during this very challenging time,” he added.

This year, economic managers expect the country’s fiscal deficit to widen to P1.613 trillion or 8.4 percent of gross domestic product, higher than the original deficit-to-GDP ceiling of 3.2 percent set before the pandemic.

According to the DOF, the CCRESL supplements the Asian Development Bank (ADB)’s  $1.5-billion loan under the COVID-19 Active Response and Expenditure Support (CARES) Program.

To be implemented from 2020 to 2021 by the Department of Health (DOH) and the National Economic and Development Authority (NEDA), the loan will be utilized retroactively for the government’s COVID-19 response efforts undertaken since April 2020.

It carries a 0.01 percent interest rate per annum, payable in 15 years, inclusive of a four-year grace period.

The DOF said the loan was processed in less than a month, the quickest official development assistance (ODA) that was ever secured from Japan, in line with the “fast and sure” approach adopted by the two countries since 2017.

“Unlike regular policy based loans, this Y50 billion or P23.5 billion financing support requires no policy conditions prior to disbursement. This will be immediately available for withdrawal the moment the loan is declared effective,” Dominguez said.

For 2020, Finance Undersecretary Mark Dennis Joven said the Philippine government is eyeing to tap $8.6 billion (P436.9 billion) in official development assistance from multilateral institutions and bilateral partners.

He said the government has already contracted almost $5 billion of this amount.

Joven said Japan has already extended ¥158.46 billion in loans and ¥3.137 billion in grants so far this year.

Since the start of the Duterte administration, total Japanese ODA has reached Y625 billion, comprising almost half of the Philippines’ ODA portfolio.

“Fourty-six percent of total Philippine ODA portfolio is Japanese, which is our biggest development partner,” Joven said.