DoF hopes to tap yuan loans from AIIB, betting on strong dollar

THE PHILIPPINES hopes to tap Chinese-currency loans from the Asian Infrastructure Investment Bank (AIIB) to take advantage of favorable borrowing costs, the Department of Finance (DoF) said.

“We explored the possibility of using local currency financing using variable spreads facility in providing the loans… and also possible co-financing arrangements with other multilateral institutions,” Finance Secretary Carlos G. Dominguez III told reporters.

“If you take the view that dollar will strengthen against all other currencies, it makes sense to borrow other currencies,” he added.

The Philippines tapped the renminbi debt market for the first time in a March bond offer, raising 1.46 billion yuan, or about P12.01 billion.

Mr. Dominguez along with other Cabinet officials visited Beijing last week to firm up financing for various China-supported projects.

“We are quite sensitive to interest rates. Although they may seem small amounts, we do not want to reverse the trend of lowering our spreads. So it is very encouraging to consider variable spreads (over LIBOR),” Mr. Dominguez was quoted as saying to AIIB President Jin Liqun, referring to the London Inter Bank Offered Rate.

“As much as possible we will do co-financing using partly lowercost ODA (official development assistance) funds and blending it with long-term multilateral funds which are generally more expensive. We (want to) bring down the average cost and stretch our money with the low-cost financing,” said the Finance chief.

Finance Assistant Secretary Mark Dennis Y.C. Joven said that AIIB will send a mission to Manila this year to review possible financing deals for infrastructure projects.

“They will send people here for study. During our discussions, they will limit the prospective projects to physical infrastructure,” he said, but noted that there is “nothing firm yet” specific project details.

The AIIB is currently cofinancing the $500-million Metro Manila Flood Control Management Project with the World Bank.

Among the projects that are lined up for China ODA are the Chico River Pump Irrigation Project, New Centennial Water Source-Kaliwa Dam Project, the Philippine National Railways’ South Long Haul Project, and the Davao-Samal Bridge Construction Project.

The second basket of projects include the Ambal-Simuay River and Rio Grande de Mindanao River Flood Control Projects, the Pasig-Marikina River and Manggahan Floodway Bridge Construction Project, the SubicClark Railway Project, the Safe Philippines Project Phase 1, and the Rehabilitation of the AgusPulangi Hydroelectric Power Plants.

China grants already provided cover the Binondo-Intramuros and Estrella-Pantaleon bridges, and other technical assistance. —