MANILA, Philippines — The head of the Beijing-based multilateral lender, the Asian Infrastructure Investment Bank (AIIB), said on Wednesday (March 3) that there would be no “debt trap” as long as the borrowing – like loans from the Philippines for the purchase and deployment of vaccines – have been well spent amid an avalanche of debt at the heart of the fight against the health and socio-economic crisis inflicted by the COVID-19 pandemic.
Speaking to members of the Association for Philippines-China Understanding (APCU) at its first Manila Online Forum for Philippines-China Relations, AIIB President Jin Liqun said the loan would be unlocked by AIIB and co-funded by Manila-based Asian Development Bank. (ADB) will help the Philippines to “quickly obtain eligible vaccines” against SARS Cov2, the virus that causes COVID-19 and which first spread to China.
As the Inquirer previously reported, the AIIB will provide $ 300 million while the AfDB will lend $ 400 million for most of the $ 764.17 million (around 37 billion pesos) needed to combat the pandemic and limit the transmission of the virus to be carried out by the Department of Health of the Philippines.
With an inbound loan from the Washington-based World Bank worth $ 500 million, the three multilateral development banks will inject a total of $ 1.2 billion into the Philippines coronavirus vaccination program after the lenders’ councils will have approved these financings in March.
Foreign loans will pay off most of the unscheduled 70 billion pesos in the 2021 national budget, which had been earmarked to purchase vaccines and roll out mass injections across the country.
The borrowing was part of a record 3.3 trillion pesos the government wanted to borrow in 2021, which would bring the Philippines’ debt to over 11 trillion pesos by the end of 2021 and further raise the debt-to-GDP ratio to 57% by the end of the year. Current debt reached a record high of 10.3 trillion pesos in January 2021.
After the Philippines borrowed a gross amount of 2.7 trillion pesos in 2020, its debt-to-GDP ratio, a measure of a country’s ability to pay, peaked at 54.5 percent in 14 years, thus reversing a gradual decline in recent years.
Jin said the AIIB made a loan of $ 750 million to the Philippines in 2020 for its Cares (COVID-19 Active Response and Expenditure Support) plan. It was also co-financed by the AfDB.
“This budget support will serve to increase the government’s testing capacity, strengthen vulnerable sectors, including agriculture, and provide conditional cash transfers and emergency assistance to poor households,” said Jin.
The Cares program loan is also said to have benefited at least one million micro, small and medium enterprises (MSMEs), 58% of which were owned by women, through wage subsidies for their workers, Jin added.
Jin, who had been part of the AfDB and stayed in the Philippines for five years, said he was “happy to work for this country in my new capacity and in a new way” via the AIIB, which had prioritized big bills. infrastructure projects before the pandemic that started in China hit the world.
Asked about fears of a debt trap that could force borrowing countries to also sell sovereign rights to repay their debts, Jin replied, “Borrowing money from abroad or taking on external debt is not possible. not necessarily the source of the debt problem. It was not the borrowing that created the debt problems, it was the use of the debt proceeds.
“It’s the use of the borrowed money that counts,” said Jin.
“We attach great importance to the use of debt resources – putting them in productive sectors, ensuring that all this money is used efficiently,” he said.
“The project must be implemented on time so that you can start generating income without delay,” he added.
For Jin, debt-ridden countries could escape the dreaded trap if they used borrowing “wisely” and “wisely.”
Before the pandemic that started in China, the Philippines had received only one loan – $ 500 million in 2017 from the World Bank for flood prevention projects in metro Manila. The country became a last-minute founding member of the AIIB in 2015 due to reluctance over possible Chinese influence in the bank.
In 2020, the Inquirer reported that the AIIB found the implementation of massive flood control projects too slow by the Department of Public Works and Highways and the Metropolitan Manila Development Authority.
The AIIB had said strict quarantine measures slowed project implementation in 2020 when only $ 6 million or 2.9% of the bank’s commitment of $ 207.6 million was disbursed. in August 2020.
The World Bank also reported in 2020 an overall progress of the “moderately unsatisfactory” implementation of the flood control project, which would benefit 1.7 million people living near 56 “potentially critical” drainage systems. in an area of 11,110 hectares in Metro Manila, which regularly suffered from flooding. .
Thanks to this project, areas currently prone to flooding in Metro Manila are expected to be free of water within 24 hours of heavy rain by 2024.
The project consisted of rehabilitating 36 existing pumping stations and constructing 20 new ones that will be operational after three years.
In addition, the project will reduce solid waste in waterways by encouraging 200 villages to adopt solid waste management programs and by moving 2,500 informal settlers out of areas near drainage systems to at least seven settlement sites. resettlement.
Published by the BST
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