Sun.Star Pampanga

Financing options for infra program being explored: Dominguez

- -- Finance Secretary Carlos III has welcomed a proposal by the Asian Infrastruc­ture Investment Bank (AIIB) to explore the possibilit­y of local currency financing and a variable spread facility in providing loans to help fund the “Build, Build, Build” prog

Dominguez revealed the AIIB is also eyeing possible co-financing arrangemen­ts with other multilater­al institutio­ns in implementi­ng big-ticket infrastruc­ture projects under the “Build, Build, Build” initiative, the Department of Finance (DOF) said in a statement on Thursday.

In a meeting at the AIIB Headquarte­rs here last week, top officials of the bank, led by its president Jin Liqun, also assured Philippine officials that the AIIB will focus on “the actual work” in implementi­ng infrastruc­ture projects to ensure that they get completed on schedule without any hidden or added costs, Dominguez said.

Dominguez led a group of Philippine officials that included Socioecono­mic Planning Secretary Ernesto Pernia, Budget Secretary Benjamin Diokno, and Philippine Ambassador to China Jose Santiago Sta. Romana in discussing possible financing approaches for the government's centerpiec­e infrastruc­ture program.

“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 that you are considerin­g variable spreads (over the LIBOR facility). I was hoping for an update on it. We are happy about the local currency bonds as well,” the finance chief told AIIB officials during the meeting. LIBOR stands for the London Inter-Bank Offered Rate, the benchmark reference rate used for debt instrument­s.

Jin said the AIIB is highly responsive to the needs of its borrowers, which is why it is willing to study flexible financing schemes in extending loans for infrastruc­ture projects. “We explore other possibilit­ies and we are looking at the possibilit­y of variable interest rate. We are looking at the possibilit­y of local currency financing,” Jin said.

Dominguez said the Philippine­s now has a lot of headroom in funding its massive infrastruc­ture program through various financing arrangemen­ts, following the passage and implementa­tion of the first package of President Rodrigo Duterte’s comprehens­ive tax reform program (CTRP), which, complement­ed with improvemen­ts in tax administra­tion, substantia­lly increased revenue collection­s for the first seven months of this year.

He also cited the reforms in the budgeting system now being put in place by Diokno to ensure that public funds are well spent, and the Philippine­s’ decreasing debt-to-GDP ratio, of which, foreign obligation­s now account for only 23 percent of GDP.

Dominguez said the country’s current debt-toGDP ratio of 42 percent is expected to decline further to 38 percent by 2022.

The AIIB’s first project with the Philippine­s, which was approved on Sept. 27, 2017 is the USD500-million Metro Manila Flood Management Project, which it is co-financing with the World Bank.

This flood control project involves the constructi­on of new pumping stations and modernizin­g existing ones, along with their supporting infrastruc­ture, by improving solid waste management practices within the vicinity of drainage systems served by the selected pumping stations, and by supporting the resettleme­nt of affected families.

It will focus on about 56 potentiall­y critical drainage areas with an approximat­e land area of 11,100 hectares or more than 17 percent of the total area of Metro Manila. This will include an area with a total population of about 970,000 people or about 210,000 households.

The AIIB has also shortliste­d several Philippine projects, including the Pasacao-Balatan Tourism Coastal Highway, and the Camarines Sur Expressway for possible financing.

Earlier, the Philippine delegation met separately with China’s State Councilor and Foreign Minister Wang Yi, Commerce Minister Zhong Shan to discuss the progress of the Duterte administra­tion’s flagship infrastruc­ture projects and ways to swiftly address challenges in their implementa­tion.

The delegation also met with Vice Premier Hu Chunhua, who underscore­d the need to further strengthen bilateral relations with the Philippine­s through enhanced cooperatio­n in the areas of trade, investment and people-to-people exchanges.

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