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PH secures $23.5 billion Japanese loan for COVID-19 response

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The Philippines can step up coronavirus testing and contract hunting, thanks to a new loan of 23.5 billion pesos from Japan to be spent on tackling the health and socio-economic crises caused by the pandemic.

On Wednesday July 1, Secretary of Finance Carlos G. Dominguez III and Chief Representative of the Japan International Cooperation Agency (Jica) in the Philippines Eigo Azukizawa signed the agreement for the loan, which can be disbursed more quickly. than other loans because it did not require political preconditions. .

“The loan proceeds will automatically be available for withdrawal once the loan is declared effective, which is expected in the last week of July,” the Department of Finance (DOF) said in a statement.

Japanese Ambassador Koji Haneda said the Philippines was the first recipient of the Japanese government’s new emergency aid in response to the COVID-19 crisis, a highly concessional loan aimed at helping countries struggling with the pandemic.

It was also the first COVID-19 related loan secured by the Philippines from a bilateral partner, as previous loans have come from multilateral lenders like the Asian Development Bank (AfDB), the Asian Investment Bank in infrastructure (AIIB) and the World Bank.

This facility, co-financed with the Manila-based AfDB, bore a fixed interest rate of 0.01% per annum, with a maturity period of 15 years, including a grace period of four years.

“We cannot underestimate the importance of this particular emergency support loan,” said Dominguez.

He said the government’s deficit-to-gross domestic product (GDP) ratio would “more than double” in 2020 as tax revenues are down, but spending on the COVID-19 response continues to rise.

On top of that, he said “we also need to fund our economic stimulus package.”

“It will force us to close the wider fiscal gap with additional borrowing,” Dominguez said.

“This facility will help us cover our budgetary expenses during this very difficult period,” he added, referring to the Jica loan.

The Cabinet-level Development Budget Coordinating Committee (DBCC) had forecast that this year’s budget deficit would widen to at least 8.4 percent of GDP or 1.6 trillion pesos.

At the end of May, government tax and non-tax revenue collection fell 16.1% year-on-year to 1.1 trillion pesos, which Dominguez blamed on lack of consumption as well as lower imports in a context of global recession.

As a result, the government had to resort to more borrowing, 75% of which would come from domestic sources through treasury bills and bonds, Dominguez said.

Dominguez said Jica’s latest loan would support government operations, including hiring contact tracers, ramping up testing, among other anti-pandemic programs and projects to be rolled out as part of pending stimulus packages in the country. Congress.

Dominguez noted that the Philippines already had 72 COVID-19 testing centers compared to just one in March, adding that setting up these facilities was “not cheap”.

Finance Undersecretary Mark Dennis YC Joven said the Philippines plans to borrow $8.6 billion in official development assistance (ODA) from bilateral and multilateral sources this year to fund the fight against COVID-19.

So far, a total of around $5 billion in loans have been secured for the COVID-19 response, Joven said.

Among ODA partners, Japan remained the Philippines’ main source of financial assistance, accounting for 46% of the total portfolio, Joven added.

The latest data from the Department of Budget and Management (DBM) showed that as of June 30, at least 374.9 billion pesos had already been released for the COVID-19 response.

The bulk, 266.2 billion pesos, came from allocations for discontinued programs, events and projects in the 2019 and 2020 national budgets.

At least 98.4 billion pesos came from special purpose funds and 10.2 billion pesos came from regular allocations to departments.

Dominguez said with more than three months already spent in various forms of quarantine, now was the “time to open up” the economy so that more Filipinos could earn their daily living.

Dominguez, who leads President Rodrigo Duterte’s economic team, said the Department of Health (DOH) has done its part in keeping the death rate from COVID-19 low while building the nation’s medical capacity. .

Many Filipinos, he said, were aware of the need to also take care of themselves amid the pandemic.

“So it’s important now also that people are allowed to slowly return to their normal lives,” Dominguez said.

Dominguez said it was important to rekindle consumer confidence in the country, as consumption not only made up about three-quarters of the national economy, but also supported the collection of taxes, revenue that the government needed to to be able to spend more.

TSB

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