PH adds $1.25B to COVID war chest

The Philippines secured a total of $1.25 billion in loans from two multilateral lenders last Thursday, beefing up its war chest in the fight against the COVID-19 pandemic.

The Beijing-based Asian Infrastructure Investment Bank (AIIB) green-lighted a loan of $750 million, part of a co-financing arrangement with the Asian Development Bank (ADB) for the Philippines’ $2.25-billion COVID-19 active response and expenditure support (Cares) program.

Last month, the Manila-based ADB approved its $1.5-billion counterpart loan for the Cares program.

In a statement, the AIIB said its new loan for the Philippines’ COVID-19 response would specifically “go toward increasing the government’s testing capacity, bolstering vulnerable sectors [including agriculture] and providing conditional cash transfers and emergency assistance to poor households.”

“Additionally, at least one million micro, small and medium-sized enterprises, of which 58 percent are registered to women, will benefit from wage subsidies,” the AIIB added.

“The Philippines is one of the first developing countries globally and the first in Southeast Asia to have introduced strict quarantine measures to limit the spread of the disease. The lockdown measures are expected to take a heavy toll on the country’s economic growth with the International Monetary Fund estimating that gross domestic product could see a sharp contraction from 6.2 percent to 0.6 percent for 2020,” the AIIB noted.

“The focus of our efforts is to help the government tackle the immediate health and economic challenges posed by the pandemic. The AIIB’s support will contribute to building economic resilience and ensuring quick recovery,” AIIB vice president for investment operations D.J. Pandian said.

Prior to this COVID-19-related loan, the Philippines had borrowed from the AIIB only once—$500 million worth in 2017 for the Metro Manila Flood Management Project, which it also co-financed with the World Bank.

Given that the AIIB is relatively new, its lending rates are higher than those of the World Bank and the ADB.

Separately, the Washington-based World Bank’s board of executive directors also on May 28 approved the $500-million Philippines Emergency COVID-19 Response Development Policy Loan.

The World Bank said its third COVID-19-related lending for the Philippines would support the country’s efforts to provide social assistance to 18 million poor and vulnerable Filipinos badly hit by COVID-19, including additional subsidies in the monthly cash transfers given to 4.3 million beneficiaries of the Pantawid Pamilyang Pilipino Program; expansion of social assistance to 13.6 million affected households that are not part of the program; and support for repatriated overseas Filipino workers.

“This new funding also supports government efforts to alleviate the financial burden faced by small and medium enterprises through a two-month wage subsidy; additional financial relief through deferrals of tax and social security payments and a credit guarantee scheme to help ensure continuity of their business operations and the preservation of people’s jobs,” the World Bank added.

“The COVID-19 pandemic has badly hurt millions of poor and vulnerable Filipino families, particularly daily wage earners. This new financing can help with the delivery of financial support for struggling families and communities while the country is ramping up efforts to contain the pandemic and reduce its economic impact,” World Bank acting country director for Brunei, Malaysia, the Philippines and Thailand Achim Fock said.

“We thank the World Bank for its prompt action on this financial support for the Duterte administration’s efforts to provide immediate relief to poor and low-income Filipinos plus small business workers who lost their income as a result of the work stoppages induced by the coronavirus pandemic. This swift loan approval underlines the strong international confidence in the government’s capability to meet the massive financial requirements of containing this global health emergency,” Finance Secretary Carlos G. Dominguez III was quoted by the World Bank as saying.