PHL, ADB sign $400-M loan deal to boost capital markets amid COVID-19

The Philippines and the Asian Development Bank (ADB) have signed a $400-million loan agreement that supports the government’s efforts to strengthen domestic capital markets as the country recovers from the economic fallout resulting from the COVID-19 pandemic.

The policy loan “Support to Capital Market Generated Infrastructure Financing, Subprogram 1 (SCMGIF1)” is set for accelerated disbursement this June to help support the immediate financing requirements of the government arising from the negative impacts of the COVID-19 outbreak, the Department of Finance (DOF) said in a statement Friday.

Finance Secretary Carlos Dominguez III and ADB country director for the Philippines Kelly Bird signed the loan accord on Thursday, June 4.

According to the DOF, the loan is a budget-support package to assist the government’s external financing requirements for this year.

The loan is expected to boost the domestic capital markets' capability to increase the supply of long-term finance to support investments by allowing the government to fund infrastructure at lower relative costs; and enabling the private sector to fund infrastructure through the capital markets.

“We again thank the ADB for its continued strong support to the Philippines as it grapples with the coronavirus scourge, this time by extending financial assistance to strengthen domestic capital markets as the country clears the path to a quick recovery from the havoc wrought on the global economy by this lethal virus,” Dominguez said.

For his part, ADB vice president Ahmed Saeed said: "This program will support the Philippine government’s development goals, including its response to the COVID-19 pandemic."

The $400-million loan is the latest funding package extended by the ADB to the Philippines so far this year.

The Manila-based multilateral lender earlier signed a $1.5-billion loan accord with the Philippines for the COVID-19 Active Response and Expenditure Support Program and the agreement for the $200-million second additional financing for the Social Protection Support Project, which brings the total lending package to the Philippines to $2.1 billion so far this year.

The DOF noted the capital market development program funded by the $400-million loan recognized the Philippine government’s efforts on three reform areas, namely, strategic oversight and enabling environment; liquidity, transparency, and price discovery in the government bond market; and institutional participation in the capital markets.

With a maturity period of 15 years inclusive of a three-year grace period, the $400-million loan is expected to be effective by June 10 and be fully disbursed by June 15, according to the Finance department.

The ADB was among the first multilateral development institutions to provide assistance to the Philippines’ COVID response efforts with its delivery of a $3-million grant for the government’s purchase of medical supplies for health workers last March.

It has also provided an emergency grant of $5 million last April for the Philippines to leverage private-sector donations for a food distribution program that has benefited 55,000 poor households in Metro Manila and neighboring areas. --KBK, GMA News