The Philippine government will soon be able to borrow yuan-denominated concessional loans with flexible interest rates from China to fund government projects especially in the infrastructure sector, the Department of Finance said.
According to Finance Secretary Carlos Dominguez III, China and the Philippines signed an agreement allowing the latter to access official development assistance (ODA) denominated in the Chinese currency, officially known as the renminbi.
The finance chief said the agreement between the fiscal authorities and China International Development Cooperation Agency would give the Philippine government an alternative to dollar-denominated loans when borrowing from lenders from the world’s second-largest economy.
Dominguez assured, however, that Manila would remain mindful of market conditions when deciding on the appropriateness of tapping the renminbi loan facility.
“President Xi Jinping is aware of our financing needs and one of the items we discussed was the interest rates, mainly on its flexibility,” Dominguez said in a telephone interview. “Previously our loans from China were in dollars, but now they opened up their renminbi facility to us.”
Aside from this agreement, the Philippines also sealed the preferential buyer’s credit loan agreement for the management consultancy of the Philippine National Railways’ (PNR) south long haul project with the Export-Import Bank of China.
The services management consultancy covers the detailed engineering and design, preparation of the terms of reference and bidding documents for a design-and-build procurement.
Among the services that will be bid out are civil works, rolling stock and electromechanical system along with the construction supervision, the finance department said.
The agreement for PNR’s south long haul project, costing $219.78 million, is under the Duterte administration’s “Build, Build, Build” program, which aims to link Metro Manila to Legazpi, Albay; Legaspi to Matnog in Sorsogon, and Calamba, Laguna, to Batangas City.
According to the DOF, the project management consultant would also provide tender assistance, which includes, among others, the market study, administration of the limited competitive bidding and tender award to the contractors and suppliers.
Presidents Duterte and Xi witnessed the exchange of the signed loan agreement between Dominguez and Export-Import Bank of China vice president Xie Ping at the Diaoyutai State Guest House in Beijing last week.
The dollar-denominated loan has an interest rate of 2 percent a year with a maturity period of 20 years, inclusive of a seven-year grace period.