P10.5-billion climate fund used to plug deficit

MANILA, Philippines - Before the May elections, the Arroyo administration used up the entire 150 million euros or roughly P10.5 billion of a French loan that Paris thought was for climate change mitigation – but the fund was used to plug the budget deficit.

Dominique Lebastard, economic counselor of the French embassy, announced last Wednesday the full disbursement of the loan from the Agence Française de Développement (AFD) in May or three months after the signing of the loan agreement in February.

In a press briefing, Lebastard said the loan was in support of the Philippines’ effort to protect the environment and mitigate effects of climate change.

Former Finance secretary Margarito Teves later told The STAR the loan was used for “budget support” to plug the government’s widening budget deficit of P325 billion.

“It was to plug the budget deficit and could not be attributed to the elections,” Teves said when asked whether the Arroyo administration violated election laws with the disbursement of the loan. He said the loan allowed the government to diversify its sources of funds.

Finance Undersecretary Rosalia de Leon explained that when a loan is used for budgetary support, it helps fund all projects of the government, including those related to environment protection.

“AFD’s first loan implemented by the Department of Finance worth 150 million euros or P10.5 billion was signed on Feb. 15, 2010 and was entirely disbursed by May 2010,” Lebastard said.

Government spending on infrastructure is not allowed during the election season. The country held national and local elections last May 10.

“AFD is supporting the Philippines in its fight against climate change and for environmental protection,” he said.

The AFD opened a local office in Manila in May. 

The AFD said climate change complicates efforts to reduce poverty by causing increasingly frequent and serious damage in economically precarious areas, and underscores the need for a low-carbon development path.

Teves signed the agreement with AFD Asia Director Martha Stein-Sochas and French Ambassador Thierry Borja de Mozota.

Luc Le Cabellec, senior adviser of the Asia Department of the AFD, arrived in the Philippines in May to oversee the creation of AFD’s Manila office.

The office now facilitates the flow of official development assistance from France.

The AFD is a development finance institution established in 1941 to implement France’s Overseas Development Assistance policies.

Funding problems 

Civil society groups, meanwhile, have called on the government to be cautious in dealing with institutions that offer funds for environment protection.

“The lack of national climate action plans has made the Philippines vulnerable twice over and this needs to change. The country is exposed to greater climate risks yet it is also vulnerable to predatory financing from funding institutions seeking profit from climate induced tragedy,” said Red Constantino of the Institute for Climate and Sustainable Cities (ICSC).

A report titled “Financing Adaptation or Funding Chaos,” released recently by the ICSC and Oxfam is calling for climate action through public finance.

The report revealed that over 54 percent of foreign climate funds have been programmed for mitigation activities while only 45 percent of the funds have gone to urgent adaptation measures.

Constantino said a public finance-driven climate action has already gained support from some political leaders like former Senate president Juan Ponce Enrile.

Liberal Party spokesman and Quezon congressman Erin Tañada has said he is open to the idea.

“Among the first steps towards raising public funds for climate action is to scrutinize the national budget,” he said.

“We need to intensify demands for rich nations to scale up compensatory funding for impacts brought about by climate change. However, it is folly for the Philippines to rely only on the proliferation of finance pledges from developed countries,” the ICSC and Oxfam report said.

The report said the Aquino government must prioritize action on adaptation. It outlined a national adaptation agenda anchored on public finance.

The 30-page report is also asking concerned officials to “access untied finance from the Adaptation Fund, a non-donor-driven institution under the UN with funding modalities that allow developing countries to sidestep conditionality-heavy financing institutions such as the World Bank.”  

“Adaptation should be declared as the national imperative,” said Oxfam climate campaigner Marie Madamba-Nuñez. Oxfam is a group of nongovernment organizations from three continents working worldwide to fight poverty and injustice.

“It is vital that new funds are mobilized and delivered to those least able to cope, such as small women shareholders in agriculture,” she added.

Recent figures provided by Oxfam showed that climate pledges from developed nations made during the December Copenhagen talks only amounted to $100 million.

The Philippines, meanwhile, only has P2.2 billion funding for climate change, P1.1 billion of which is intended for mitigation and the remaining P956 million for adaptation.

Oxfam and ICSC are also calling for the creation of a National Survival Fund “that will democratize access to and create predictable long-term finance streams for urgent adaptation and disaster-risk reduction projects and programs.”

“Rationalization and the immediate revision of the implementing rules and regulations of the Climate Change Commission should be considered urgent,” they added.

“The Commission needs to play a capacity-building, coordinative leadership role, primarily as the country’s lead climate action rating agency,” the report read. With Rhodina Villanueva