PH raises to $500M requested loan from WB for advance vaccine payments | Inquirer Business

PH raises to $500M requested loan from WB for advance vaccine payments

By: - Reporter / @bendeveraINQ
/ 07:17 PM February 04, 2021

MANILA, Philippines—The Philippines has further raised to $500 million (about P24 billion) the loan it is requesting from the World Bank for coronavirus vaccines as more funds were needed to pay vaccine makers at least half in advance.

Documents seen by the Inquirer showed that from $300 million in December 2020 and $400 million last January, the project cost for additional financing for the COVID-19 emergency response project again rose to half-a-billion dollars this month.

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The Inquirer sought confirmation from Finance Undersecretary Mark Dennis Joven, who said the Department of Finance (DOF) will provide information after it had secured approvals for various loan applications.

Joven echoed the amount of loans mentioned by Finance Secretary Carlos Dominguez III last January—some $1.3 billion in total financing from the Washington-based World Bank, the Manila-based Asian Development Bank (ADB) and the Beijing-based Asian Infrastructure Investment Bank (AIIB).

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At about P62.5 billion, foreign loans could be a major source of funds for P70 billion in unprogrammed appropriations in the 2021 national budget that had been set aside for the vaccination program.

Unprogrammed appropriations are funded by foreign borrowings and excess revenues.

For 2021, the government planned to spend P82.5 billion on mass vaccination, including P2.5 billion in the Department of Health’s (DOH) budget plus P10 billion in continuing appropriations from the 2020 budget under the Bayanihan to Recover as One Act or Bayanihan 2 Law, whose validity was extended until June 2021.

According to the World Bank, the fresh $500-million loan it committed was aimed at strengthening “the Philippines’ capacity to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness.”

Earlier World Bank documents showed that its Washington-based board would discuss the loan proposal on March 24.

In all, the World Bank’s near-term lending pipeline for the Philippines for 14 projects amounted to a bigger $3 billion.

Another lender, ADB, had committed to lend the Philippines $325 million under its regional financing scheme called Asia-Pacific Vaccine Access Facility (Apvax).

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An AIIB representative told the Inquirer last January that the Chinese lending agency was currently reviewing vaccine finance requests from member-countries, including the Philippines.

As the Philippines scrambled to advance payments for vaccines, it renegotiated a couple of loan packages from World Bank and ADB in 2020 for immediate disbursement of funds.

In December 2020, Dominguez and the World Bank signed an amendment to the $100-million Philippines COVID-19 emergency response project approved in April 2020, which was supposed to cover only procurement of additional medical equipment to strengthen the health care system amid the pandemic.

The amended loan terms allowed the Philippines to divert up to $30 million to vaccine procurement, which the Department of Budget and Management (DBM) already released to the Department of Health (DOH) in the amount of P1.49 billion before 2020 ended.

The DBM also released to the DOH in December 2020 at least P1.27 billion to buy vaccines. The funds were from the ADB’s $125-million health system enhancement program to address and limit (Heal) COVID-19 project approved in August 2020 which was originally intended to be spent on buying personal protective equipment (PPEs).

It was the $25 million that the ADB referred to when it announced in a press release this week its financial support to the Philippines’ vaccination program.

These World Bank and ADB project loans “needed to be expanded to cover vaccines on top of the original scope,” Joven explained.

In total, the DBM already released to the DOH P2.76 billion, or $55 million, from these two loans.

For the AIIB, Joven said there was no need to restructure its $750-million contribution to COVID-19 active response and expenditure support (Cares) program that was financed with ADB, because the money was used as budgetary support.

Why did the Philippines seek to restructure the World Bank and ADB loans? Because it needed a bigger amount to prepay vaccines suppliers beyond what the country’s procurement law can allow.

According to ADB documents, the Philippines needed to pay $50 million in advance payments in January this year for as many as six vaccine supply agreements.

However, Republic Act (RA) No. 9184 or the Government Procurement Reform Act allowed advance payment equivalent to only a maximum of 15 percent of the cost of government-financed projects.

Fortunately, this advance payment requirement “does not apply in the case of multilateral-funded projects, which are governed by the procurement guidelines of multilateral development banks,” Joven said.

According to ADB, “vaccine developers require advance payments of up to 50 percent of the supply agreement to secure doses.”

The Philippines’ procurement law “restricts the government from reaching bilateral agreements with vaccine developers,” while public procurement was also “lengthy and can take several months to complete, further impeding the government’s ability to secure vaccine orders in a timely manner,“ ADB said.

“The government’s immediate goal is to lock in supply agreements amounting to $100 million, for which up to $50 million may need to be made in advance payments. The current legal framework will allow the government to make advance payment of up to $15 million only,” according to ADB.

In the amended documents for the Heal COVID-19 project, the ADB said “uncertain vaccine supply” was the reason for the loan restructuring.

“Several COVID-19 vaccines are being rapidly developed globally and obtaining regulatory approvals from a number of countries,” ADB said.

“However, high-income and upper middle-income countries have entered into supply agreements with vaccine developers for more than six billion vaccine doses, significantly affecting the future supply of vaccines for developing countries,” it added.

“The COVID-19 vaccines global access (COVAX) facility, designed to help low and middle-income countries access safe and effective vaccines, has only contracted about 1.3 billion doses,” ADB said.

“It aims to provide free vaccine doses for up to 20 percent of these countries’ populations. However, there is no firm timeline yet as to when the supplies will start,” ADB added.

The Philippines, ADB said, “is determined to secure sufficient and timely vaccine doses” despite these challenges:

  • “Competing global demand for vaccines.”
  • “Increasing number of supply agreements that lock in future supply.”
  • “Volume and delivery uncertainties relating to Covax.”

The Philippines, however, still faced constraints in vaccine financing. Citing government estimates, ADB said the amount needed for vaccines could be as high as P82.5 billion “to provide vaccines to approximately 55 percent of the country’s population—still short of its plan to vaccinate all Filipinos by 2023.”

Citing the vaccine allocation plan prepared by the DOH, the government aims to vaccinate 25.35 million Filipinos in 2021, 44.63 million in 2022 and 41.7 million in 2023. The Philippine population was expected to grow to 112.89 million by that time.

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