PH rethinks China-backed loans due to high rates

The Philippines is carefully studying if it will avail itself of more loans from the Beijing-based Asian Infrastructure Investment Bank (AIIB) given the lender’s relatively higher rates.

“The AIIB wants to finance our projects, but we need to wait until the point it makes sense for us to take out AIIB loans,” Finance Undersecretary Mark Dennis Y.C. Joven said in an interview on the sidelines of last week’s Development Budget Coordination Committee (DBCC) meeting.

Together with Finance Undersecretary Karl Kendrick Chua, Joven attended the AIIB’s fourth annual meeting in Luxembourg on July 12-13.

Joven said that so far, [the AIIB’s terms were] more expensive than the ADB’s, referring to the Manila-based Asian Development Bank.

Also, the AIIB’s lending rates are “almost the same as the World Bank’s—so on a project loan side, if you have a cheaper alternative, why proceed?” Joven added.

To date, several small-scale water projects in the Philippines are in the AIIB’s pipeline of potential projects for financing, according to Joven.

In May, Joven told the Inquirer that the Philippines was looking at tapping financing from the AIIB for four more big-ticket infrastructure—two roads and two water projects.

Last year, the Department of Finance said the AIIB was considering to extend loans for the Camarines Sur expressway (San Fernando-Pili section) and the Pasacao-Balatan Tourism Coastal Highway, both in Camarines Sur province.

Since becoming a founding AIIB member in 2015, the Philippines had been extended only one loan thus far—$500 million approved in 2017 for the Metro Manila Flood Management Project, which the China-led lender cofinanced with the Washington-based World Bank.

In a report in January, the AIIB noted that “infrastructure construction activity in the Philippines looks likely to increase, driven by the government’s state utilities” even as risks included the government’s tendency to underspend, high inflation and a weak peso seen driving construction costs up. —BEN O. DE VERA