Philippines bags $400-M loan from ADB to boost capital markets

The Asian Development Bank (ADB) has approved another loan for the Philippines, this time $400 million for the country’s domestic capital markets and infrastructure development.

ADB said the policy-based loan will be under its Support to Capital Market-Generated Infrastructure Financing Program Subprogram 2, which seeks to boost institutional participation in the market from insurance and pension funds.

“There is huge potential in tapping this sector for long-term funds since they have long investment horizons and low leverage,” the ADB said in an emailed statement.

“These investors can offer better debt pricing and longer maturities in local currency and are less likely to sell or retreat during short-term market corrections,” it added.

With the country’s infrastructure financing gap estimated at P2 trillion a year until 2030, ADB Principal Financial Sector Specialist for Southeast Asia Stephen Schuster said it will require various sources of long-term financing.

The financing would support the recovery of micro, small, and medium-sized enterprises, social protection, and infrastructure development priorities.

“A deeper, more diversified investor base can help ease fiscal constraints,” he said in the statement.

The ADB expects the Philippine economy to grow 6% this year, based on its Asian Development Outlook. This is seen to accelerate further by 6.3% next year.

The national government’s debt climbed to record-high of P12.68 trillion as of end-March, given the continuing borrowing efforts to boost the war chest against the COVID-19 pandemic.

The Department of Finance (DOF) earlier this month said the Philippine government will have to raise P249 billion additional revenues annually in the next 10 years to pay for the historic P3.2-trillion additional debt incurred following the COVID-19 pandemic.—AOL, GMA News