The Department of Finance (DOF) and the Agence Française de Développement (AFD) have signed two credit facility agreements worth €250 million (approximately ₱14 billion) combined to support two major policy reforms of the Philippine government that aim to expand financial services to vulnerable sectors and increase private sector participation in infrastructure projects.
Both programs, co-financed with the Asian Development Bank (ADB), also aim to support the Philippine economy and strengthen its resilience in the post-Covid-19 period.
Finance Secretary Carlos Dominguez III and French Ambassador to the Philippines and to Micronesia Nicolas Galey signed the loan agreements for the Inclusive Finance Development Program (IFDP) worth €100 million and the Expanding Private Participation in Infrastructure Program (EPPIP) worth €150 million on June 9.
“The Philippine government is grateful to the Agence Francaise de Developpement (AFD) for co-financing with the Asian Development Bank (ADB) two programs supportive of President Duterte’s overriding goal of accelerating infrastructure development in order to spur high growth, attract investments, create jobs and achieve financial inclusion for all Filipinos,” Secretary Dominguez said.
Secretary Dominguez pointed out that President Duterte has put his signature project “Build, Build, Build” back on the fast track amid the COVID-19 pandemic, given that infrastructure investments spell the highest multiplier effect on the economy, particularly the creation of jobs that will make up for the ones lost during this global health emergency.
“Such financial support from the country’s development partners like AFD for our priority programs is crucial at this time when the Philippine government is embarking on its resources-intensive, four-pillar strategy to suppress the coronavirus outbreak and provide relief to our most affected sectors while restarting the stalled economy to a quick recovery from the global economic slump induced by the lethal virus,” he said.
The €100 million policy-based loan for the first sub-program of the IFDP will help fund initiatives of the Philippine government to expand financial services across the country, especially among small entrepreneurs, farmers and fisherfolk, women and other vulnerable sectors.
The AFD loan for the Program will also help the government consolidate its institutional and regulatory environment, improve its financial infrastructure, and strengthen the capacities of financial service providers, supervisors and regulatory bodies in line with its goal of building an inclusive and resilient financial sector.
In addition, AFD will also finance a €1.5 million Technical Assistance (TA) program to strengthen the capacities of financial inclusion stakeholders (i.e. supervisor, operators, clients). The TA program, which will be carried out in partnership with the Bangko Sentral ng Pilipinas (BSP) and the Rural Bankers Association of the Philippines (RBAP), aims to help accelerate the digital transformation of the Philippines’ financial institutions, especially those serving rural communities.
The €150 million loan for the EPPIP aims to heighten private sector participation in infrastructure financing in line with the government’s goal of fast-tracking the implementation of its “Build, Build, Build” program to jumpstart the economy and create more jobs.
This policy-based loan will complement the government’s funding plan to secure financial resources for critical programs, such as the “Build, Build, Build,” as it grapples with market uncertainties and volatility, as well as increased social expenses and reduced fiscal resources amid the economic crisis triggered by the Covid-19 pandemic.
Three main outputs are targeted through the EPPIP program in order to develop sustainable public-private partnership (PPP) projects: strengthen the government’s support to PPPs; expand and efficiently implement a pipeline of PPP projects and strengthen the legal and regulatory framework for PPPs.
Beside this policy loan, discussions are underway to secure additional funding from the European Union’s Asian Investment Facility in the form of a grant to be channelled through the Philippines’ PPP Center. The proposed grant aims to facilitate and encourage the development of sustainable PPP projects at the local level, both in terms of promoting resilient infrastructure and in the mitigation of greenhouse gas emissions. Stimulating the development of health infrastructure will be a key component of the forthcoming European Union support.