PH seeks $500-M contingent credit line from World Bank

The Philippines is seeking a fresh $500-million World Bank loan, from which the government can immediately draw money in the aftermath of natural disasters and health emergencies.

The proposed fourth disaster risk management development policy loan with a catastrophe-deferred drawdown option (CAT-DDO) will be the newest addition to the World Bank’s near-term financing pipeline for the Philippines.

Just last year, the Washington-based multilateral lender extended the third of a series of disaster risk management development policy loans, which also amounted to $500 million, partly to be spent on COVID-19 response.

But the loan approved in 2020 did not have a CAT-DDO—defined by the World Bank as a “contingent financing line that provides immediate liquidity to countries to address shocks related to natural disasters and/or health-related events.”

Loans with CAT-DDO serve as early financing while funds from other sources such as bilateral aid or reconstruction loans are being mobilized, the World Bank explained.

Liquidity facility

The Philippines earlier secured $500-million each credit lines for the CAT-DDOs 1 and 2 in 2011 and 2015.

The first CAT-DDO approved by the World Bank a decade ago was the first-of-its-kind liquidity facility in the Asia-Pacific region.

In 2018, the World Bank released $496.25 million from CAT-DDO 2 to rehabilitate the areas flattened by typhoon “Ompong” in Luzon.

The newest CAT-DDO loan, meanwhile, will complement the earlier proposed $600-million Philippines promoting competitiveness and enhancing resilience to natural disasters subprogram 3 financing, which will be up for approval by the World Bank board in December.

The development policy loan to be implemented by the Department of Finance “targets measures supporting economic recovery from the negative impact of the COVID-19” pandemic.

In all, the World Bank now has 13 upcoming loans for the Philippines, amounting to a total of $3.2 billion. —Ben O. de Vera INQ