NEDA urges more project proposals for concessional loans

Confident that the Philippines will reach upper middle-income status next year, the National Economic and Development Authority (NEDA) is urging government agencies to further accelerate proposals for infrastructure and other critical projects to maximize privileges from concessional loans.

NEDA Undersecretary Joseph Capuno said the government has two more years or until 2027 to avail of concessional loans under official development assistance (ODA) after the Philippines moves up to upper middle-income status in 2025.

“We’re talking with the implementing agencies to speed up the preparations for the flagship infrastructure projects to be elevated to the NEDA board and for approval within the next two years to take advantage of that window of opportunity,” he said last Friday during the presentation of NEDA’s year-end report.

Long-interest, long payment periods

Concessional loans under ODA are provided by governments and bilateral and multilateral institutions and offer low interest rates and long payment periods.

“Once you graduate from a lower middle-income country, you lose your ODA privileges like subsidized interest rates,” NEDA Secretary Arsenio Balisacan said.

For example, Capuno said Japan offers only a 0.1 percent rate while South Korea requires 1.4 percent and a grace period of 10 years.

However, Balisacan said the government has been securing other financing methods with development partners that can grant similar favorable loan terms.

“We’ve been talking with development partners and they say there are open windows with the same features,” he said.

Balisacan stressed that the Philippines’ positive credit management and sustained economic growth ensure that the country will continue to easily access loans from foreign sources.

Country’s creditworthiness

“By being able to achieve and continue our progress in sustaining growth and improving our governance and institutions, we enhance the creditworthiness of the country by way of credit upgrades. So, you get the same rate as before because you are a good borrower and it’s just like being there as a concessional loan borrower,” Balisacan said.

These remarks came after S&P Global Ratings upgraded the Philippines’ credit outlook from stable to positive credit outlook and gave it an investment grade of “BBB+” for long-term debts and “A-2” for short-term debts.

“The S&P Global Ratings outlook is one example that we are on track in becoming an upper middle-income country,” NEDA Undersecretary Rosemarie Edillon said.

In the third quarter, the Philippine economy expanded by 5.2 percent, lower than the 6.4 percent in the previous quarter, according to the Philippine Statistics Authority.

However, the latest level was higher than Indonesia’s 5 percent, China’s 4.6 percent, and Singapore’s 4.1 percent.

S&P Global Ratings expects the local economy to grow by 5.5 percent and 6.2 percent a year over the next three years due to strong consumption of goods and services among households and firms and better trade conditions.

Department of Finance Secretary Ralph Recto said the country could attract more foreign investments to boost the economy through the newly enacted Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act.

This allows lower corporate income tax at 20 percent from 25 percent and a greater deduction of 100 percent from 50 percent on power expenses of manufacturing firms.

As the country levels up to an upper middle-income status, Recto expects its debt-to GDP (gross domestic product) ratio to decline from 60.6 percent this year to 56 percent in 2028.

Capuno said new projects proposed consisted of the Ilocos Norte-Ilocos Sur-Abra Irrigation Project and the Accelerated Bridge Construction for Greater Mobility and Calamity Response Project.

NEDA’s online dashboard for infrastructure flagship projects (IFPs) shows a total of five projects were submitted for approval.