DOF welcomes $300 million loan from ADB

MANILA, Philippines — The Department of Finance (DOF) welcomed the Asian Development Bank (ADB)’s decision to approve a $300 million loan that will support efforts to ramp up financial inclusion, especially in unserved and under served areas of the country.

In a text message to reporters, Finance Secretary Carlos Dominguez said the ADB’s $300 million loan for the Inclusive Finance Development Program, Subprogram 2 would help the Philippines reach its financial inclusion goals, which is one of the pillars of the Duterte administration’s socioeconomic agenda.

“This ADB facility will support the accelerated rollout of the National Identification System, which will enable more Filipinos to open bank accounts and speed up the delivery of social assistance programs,” Dominguez said.

He said this would also support the country’s efforts to digitalize the country’s banking and payments system, especially with the pandemic underscoring the importance of contactless transactions for economic resilience.

Moreover, the finance chief said the loan would also support initiatives to strengthen the country’s agricultural value chains, introduce financial literacy in basic education, and improve Islamic banking.

“Filipino families will be less vulnerable to onerous lending practices, and government subsidies can reach beneficiaries faster and more efficiently,” Dominguez said.

Even with this loan, Dominguez said the country’s debt position would still be “strong and sustainable.”

“More importantly, returns of this public investment will accrue to millions of working Filipino families and small businesses who are currently excluded from the financial system. It will also boost our efforts to build our economy back better,” Dominguez said.

For this year, the government is planning to borrow P3 trillion to bridge the deficit in its budget, which is expected to widen to 9.6 percent of gross domestic product due to the impact of the pandemic.

The bulk, or about 75 percent, of the amount is estimated to come from domestic sources, while the remaining 25 percent will be borrowed from foreign lenders.

Data from the Bureau of the Treasury (BTr) showed that gross borrowings in the first half already reached P1.72 trillion, 104.86 percent up from P840.84 billion in the same period last year.

Nevertheless, economic managers are confident that the national government’s debt would be kept at a sustainable and responsible level, which is within the 60 percent internationally-recommended debt threshold.