$500-M calamity loan from WB approved by BSP ‘in principle’

MANILA, Philippines — The Bangko Sentral ng Pilipinas has approved in principle the government plan to tap $500 million worth of loan from the World Bank to fund reconstruction and enhance the country’s capability to cope with future calamities.

The government wants to beef up its calamity fund to better deal with the ill effects of climate change, apart from damages wrought by typhoons.

The government will have sole discretion in disbursing the calamity fund.

“[The loan] covers unexpected post-disaster costs, as well as disaster risk-reduction efforts. It would fund post-disaster reconstruction efforts [in case of a calamity],” BSP Governor Amando Tetangco Jr. said, quoting details of the loan proposal submitted to the central bank.

The BSP’s approval of foreign currency denominated loans is necessary because it is the central bank that monitors the impact of foreign currency inflows on the health of the domestic economy.

In applying for the loan, the Philippine government merely took up the World Bank’s offer of assistance to enable the country to better deal with the adverse effects of climate change.

Disbursed amount of the loan is payable in 25 years, inclusive of a 10-year grace period, and carries an annual interest rate equivalent to the six-month LIBOR (London Inter-Bank Offer Rate) plus 1.05 percent.

In 2009, the Philippines experienced its worst calamities in recent years when it was hit by tropical storm “Ondoy” and typhoon “Pepeng.”

According to the World Bank, reconstruction after the twin calamities would amount to around $4 billion.

Significant levels of carbon emissions, especially in industrialized countries, had affected the earth’s atmosphere, resulting in drastic climate change. In recent years, the country has been seeing higher temperatures and stronger typhoons.

Although the Philippines is not a significant contributor of carbon emissions, it is still on the list of countries most vulnerable to the impact of climate change due to its location.

The World Bank has been encouraging developing countries most vulnerable to climate change, including the Philippines, to seek assistance from the international community.

Several industrialized countries have pledged to increase their support for programs and projects of developing countries aimed at reducing damages associated with climate change.