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ADB OKs $400-M loan to strengthen Philippine capital markets

The Asian Development Bank (ADB) on Tuesday said it has approved a $400-million loan to support the Philippine government in its efforts to strengthen domestic capital markets in a bid to revitalize the economy post-COVID-19 pandemic.

In a statement, the ADB said the policy-based loan “Support to Capital Market-Generated Infrastructure Financing Program, subprogram 1” aims to address key constraints that have limited the growth of domestic capital markets, especially government and corporate bond markets.

The loan facility also focuses on building a vibrant domestic institutional investor base that will become a sustainable source of long-tenor infrastructure finance, the multilateral lender said.

The ADB noted that the capital market development program will support higher public infrastructure spending for years to come.

“Resilient and vibrant capital markets are key to achieving economic development, growth, and poverty reduction as set out in the government’s long term strategy AmBisyon Natin 2040,” said ADB vice-president Ahmed Saeed.

“By developing domestic capital markets, funds are generated to support higher levels of long-term investments and sustainable quality job creation. The program approved today will support the Philippine government’s development goals, including its response to the COVID-19 pandemic,” Saeed said.

The capital markets development program has supported various reforms in recent years, including the launch and implementation of the first government-led, comprehensive domestic bond market development plan, according to the ADB.

The Philippines also has modernized its government debt trading infrastructure and provided a reliable yield curve to support the pricing of private sector debt instruments, the bank said, noting that other reforms have helped build an enabling environment for private sector debt instruments.

“The said forms will boost outstanding corporate bonds to an estimated 12% of gross domestic product by 2021, up from 7.5% in 2017,” the ADB said.

The government also has upgraded the Personal Equity and Retirement Account system, which makes it easier for Filipinos to tap into the capital markets to save for the future.

Since 2013, the ADB said it has been supporting reforms in the domestic capital market, which aimed to build a more diversified institutional investor base to encourage the development of long-term finance for infrastructure.

The new loan brings ADB’s total lending to the Philippines to $2.1 billion so far this year.

The bank has approved a $1.5-billion loan for the COVID-19 Active Response and Expenditure Support Program on April 23 and $200-million in additional financing for the Social Protection Support Project on April 27. — Ted Cordero/BM, GMA News