World Bank to lend Philippines $600M for pandemic recovery, climate financing

MANILA, Philippines — The World Bank awarded a fresh loan program to the Philippines to support the domestic economy's recovery from the pandemic and improve the resilience of the financial sector.

In a statement on Tuesday, the Washington-based lender granted the country a $600-million loan. Aside from supporting the Philippine economy's recovery from the pandemic, this new loan financing is aimed at supporting three policy reform areas: the stability of the financial sector, improving financial inclusion for Filipinos and businesses, and climate and disaster risk finance. 

"Policy actions that strengthen the stability of the financial sector – including banks and insurance companies – will help Filipino families, businesses, and investors withstand financial shocks and enhance their resilience by ensuring that problems in these financial institutions are detected at an early stage without severe disruptions to the economy,” said Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand.

The Philippine economy took a hit at the onset of the pandemic. The economy sank to lows unseen since World War II as the Duterte administration imposed mobility restrictions to prevent the spread of the virus.

Catastrophe insurance

As it is, the World Bank noted that the new loan program will aid the development of the country’s catastrophe insurance market. 

This relatively-new financial instrument could prevent the public from sliding into poverty if natural disasters strike. As it is, catastrophe insurance products are designed to protect households, assets, and businesses against natural disasters.

The Southeast Asian archipelago sits within the Pacific Ring of Fire, which leaves the Philippines vulnerable to a host of natural disasters annually. Likewise, the developing nation is at the receiving end of the climate crisis, as its wildly vulnerable to the effects of a warming planet.

Diop noted that catastrophe insurance will enable the national government to use its limited resources to support communities and Filipinos who need it most. 

On the other hand, the development policy loan will also expand financing access for the public and businesses through digital technologies. 

The World Bank indicated that development policy loans are sources of quick-disbursing assistance to countries pursuing reforms. As it is, this type of loan supports policy and institutional changes to foster an environment for equitable growth within a country’s development priorities. 

That said, the World Bank stood as the country’s third-largest source of official development assistance in 2021 according to data from the National Economic and Development Authority.