Finance Secretary Carlos Dominguez III has debunked misleading claims that high interest rates were attached to loans extended by China to the Philippine government to help fund projects under the “Build, Build, Build” program of the Duterte administration.
He said the Philippines was able to secure better concessional loan financing from China for its big-ticket water infrastructure projects with lower interest rates and fees as well as longer grace periods on the Duterte watch compared with those obtained by the past administration.
He said data collated by the DOF’s International Finance Group (IFG) show that the New Centennial Water Source-Kaliwa Dam Project, which China is helping fund with a USD 211-million loan was secured by the Duterte administration with a low interest rate of 2 percent per annum.
The Arroyo administration, on the other hand, was able to obtain the government’s USD 116.6 million-loan from China for the Angat Water Utilization and Aqueduct Improvement Project Phase II with a higher interest rate of 3 percent per annum.
The Angat dam project was completed in 2012 during the administration of then President Benigno Aquino III, who thanked China for extending the loan for the project.
Dominguez noted that the then Aquino administration “fulsomely” accepted the project funded by China on behalf of the Philippine government.
While both the loans for the Kaliwa and Angat dam projects have a maturity period of 20 years, the Kaliwa dam project’s grace period is 7 years, compared to the shorter 5 years for the Angat aqueduct project.
Dominguez noted that the Duterte administration was able to negotiate a commitment fee for the Kaliwa dam of only 0.3 percent of the undisbursed amount of the loan, while China charged 0.4 percent of the undisbursed amount for the Angat aqueduct project.
A management fee of 0.3 percent of the loan amount is included in the Kaliwa dam project, which is lower than the 0.4 percent for the Angat aqueduct.
Moreover, Dominguez noted that the Duterte administration made sure that the government would not pay a pre-payment penalty fee for the Kaliwa dam project.
In contrast, the loan obtained by the former Arroyo administration for the Angat aqueduct included a pre-payment indemnity of 1 percent per annum accrued on the prepaid loan, from and including the date of prepayment, up to and excluding the original repayment date, for such prepaid part of the loan.
The loan accord for the Kaliwa dam project was signed on November 20 last year while the loan agreement for the Angat aqueduct project was signed on January 7, 2010.