Parliament approves P1.57bn loan from AfDB
GIA stood at P4.9 billion in March 2021 Declined to P3.6 billion by September
Economic Recovery Support Programme, AfDB Loan Authorisation Bill, Bill Number 31 of 2021
Parliament on Wednesday this week approved government to borrow the sum of P1.57 billion from the African Development Bank ( AfDB).
This came after Finance and Economic Development Minister Peggy Serame tabled the “Economic Recovery Support Programme, AfDB Loan Authorisation Bill, Bill Number 31 of 2021.”
Although both sides of the aisle gave the Bill the thumbs up, some abstained citing the 20 years loan tenure maturity with five years grace period.
Serame had told Parliament that the Ministry approached the AfDB for a budget support loan amounting to USD137 million, or approximately P1.57 billion to finance part of the projected budget deficit during the 2021/ 2022 financial year.
The proposal to borrow from the AfDB is part of the approved budget financing strategy. She said that external borrowing has an added advantage of rebuilding the foreign exchange reserves.
The Loan negotiations with AfDB to secure the facility were concluded on the 27th of August 2021 and the Bank’s Board met and approved the facility on the 8th of September 2021.
Following the Board approval the internal processes covering the drafting of the Loan Authorisation Bill by Attorney General’s Chambers and the submission of the Bill to Cabinet for approval had to be fulfilled before the Bill could be published in the Gov
ernment Gazette.
She said the projected budget deficit for the financial year 2021/ 2022 is at P10.16 billion or 5.1 percent, up from the initially projected budget deficit of P6.03 billion or 3.0 percent of GDP at the time of the Budget presentation.
This deficit follows the deficit of P16.4 billion recorded in the previous financial year ( 2020/ 2021), due to the impact of COVID- 19 pandemic on the global and domestic economies.
These persistent budget deficits have resulted in the depletion of accumulated Government savings in the face of high levels of spending and reduced revenues. As a result, the country has had to rely on debt to finance its fiscal deficits.
Serame said the balances in the Government Investment Account stood at P4.9 billion as at March 2021, while by September 2021 the total had declined to P3.6 billion.
This shows that government cannot continually draw- down to finance the projected deficits into the medium term.
Further that the Bond Issuance Programme, which parliament authorised to be increased to P30 billion, is used to borrow domestically.
She added that the target for new issuance of Bonds and Treasury Bills during this financial year is P5 billion. However, uptake has been disappointing, despite the improved yields on offer. By November 2021, only P2.01 billion had been raised through domestic debt issuance.