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Philippines eyes $200-M World Bank loan

THE World Bank has lent $2.78 billion (P133 billion) to the Philippine government so far this year. — PHILIPPINE STAR/MICHAEL VARCAS

THE Philippine government is seeking a $200-million loan (P9.6 billion) from the World Bank to fund programs that will strengthen the financial sector and widen financial inclusion in the country, a document from the multilateral lender showed.

The World Bank said the executive board will likely act on the loan, formally called the “Philippines First Financial Sector Reform Development Policy Financing,” on July 14, 2021.

The loan will support programs that aim to make the country’s financial sector more stable and resilient, expand financial inclusion among Filipinos and businesses, as well as promote disaster risk and sustainable finance.

It will support policy reforms meant to promote digital financial services and help micro, small and medium enterprises gain more access to financing by de-risking private commercial bank financing.

The Washington-based multilateral lender said the loan is one out of two that its lending arm International Bank for Reconstruction and Development  is planning to extend to the Philippine government to strengthen the financial sector.

“The financial system, while smaller than Asian peers, has broadly withstood the impact of COVID-19 (coronavirus disease 2019). In terms of financial depth, access and efficiency, the Philippines’  financial development is above average among emerging markets but on the lower side among emerging Asian economies,” the document read.

The bank capital adequacy ratio in the country was stable at 15% in the past decade, but still lower than other emerging markets in Asia.

Meanwhile, the non-performing loans ratio of banks reached 2.8% at the end of August, higher compared to the two percent before the coronavirus pandemic escalated, but still below the levels seen after the Asian Financial Crisis in 1997 to 1998.

“The key risks to financial stability arise from significant interlinkages between banks and non-financial corporates through mixed conglomerate ownership structures and large lending exposures,” it added.

The World Bank has lent $2.78 billion (P133 billion) to the Philippine government so far this year, the most recent is the two loans worth $900 million approved last week.

This included a $600-million (P29 billion) loan for programs that will promote competitiveness and boost resilience to natural disasters, and a $300-million (P14.4 billion) loan to provide additional financing for the National Community Driven Development program.

The government borrows from local and foreign lenders to support its budget deficit, seen hitting 7.6% of gross domestic product. — Beatrice M. Laforga

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