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August 18, 2008

ADB to extend $250m in fiscal reform loan
The Asian Development Bank (ADB) will extend loans to support the government’s fiscal sustainability program, according to the Bangko Sentral ng Pilipinas (BSP), Philippines’ central bank.

Local Daily The Manila Bulletin quoted the bank’s governor Amando Tetangco Jr. as saying that the Monetary Board approved in principle the government’s $250 million loan from ADB.

“This is a program that includes [a] series of key fiscal, economic, and government policy reforms,” Tetangco told reporters.

The loan falls under the ADB’s development policy support program, which aims to restore fiscal sustainability, maintain macroeconomic stability, and improve credit worthiness. The program also aims to enhance governance, public expenditure management and improve the investment climate.

The loan will mature in 15 years inclusive of five years grace period. Interest rate will be determined in accordance with ADB’s LIBOR-based lending facility. LIBOR, the London inter-bank offered rate, is the rate at which major lenders borrow money from each other overnight.

The Monetary Board approval comes after the Philippines kept its first-half budget gap below the ceiling on expenditure cuts.

The government posted a budget deficit of 18 billion pesos, or way below the 41-billion peso ceiling for the period.

First-half revenues amounted to 570 billion peso, or 8 percent higher than the programmed 561 billion peso for the period, while expenditures reached 588 billion peso, or 15 percent lower than the projected 602-billion peso disbursements.

The lower spending in the first six months of the year was due to delayed implementation of government’s projects.

In June alone, the government registered a surplus of 769 million peso, on revenues of 87.6 billion peso and expenditures of 86.8 billion peso. This year’s surplus however is lower than last year’s 782 million peso.

The government earlier pushed back its target to balance its budget this year to 2010 amid plans to raise spending and cushion the public from the double whammy of high inflation and an economic slowdown.

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