The National Government, in its current review of its borrowing strategy for 2005, is not expecting any aid fund or official development assistance this year, not until the country’s budget deficit is reduced to 2.5 percent of gross domestic product.
"When the budget deficit is reduced to 2.5 percent of GDP or about
P125 billion, then the ODAs will come. (This is why) we have to reduce our deficit as quickly as we can," according to Finance Secretary Cesar V. Purisima. The target for 2005 is a deficit of P180 billion or 3.5 percent of GDP.
"The ODAs this year is not as big as programmed before (so) we will rely more on commercial borrowing," he said. Initially this amounts to $4 billion.
The DoF is currently reviewing the currency mix for its borrowing profile this year. At the moment, the NG borrows more in US dollar, which is 50 percent of the borrowing mix, while 30 percent are in yen and the balance are borrowings in euros. Purisima said the DoF is also considering increasing its euro borrowings.
The government needs dollars to pay for its maturing obligations. For this year the NG is supposed to have maturing obligations amounting to $7 billion, including Bangko Sentral ng Pilipinas and the National Power Corp.
The central bank’s dollar reserves decline because of regular debt servicing by the BSP and NG, but aggressive intervention to prop up the peso against the US dollar is also a major deflationary concern. A strong position helps the central bank protect the peso from speculative hits.
In the meantime the Philippines received fewer grants or aid fund from donor countries in 2004 or a decline of 93.82 percent compared to the previous year, documents from the Bureau of Treasury showed.
Last year – which is an election year, donor nations such as Japan, the United States and Europe pulled the strings and released only
P74 million in total grants against 2003’s P1.198 billion. The grants are included in BTr tally as revenues since assistance funds are freebies. (LCC)
Japan, the top donor country in the last 23 years, discharged
P590 million in grants in 2003 but they trimmed the number down to only P28 million in the last year.
Besides 2004 being an election year and thus grants were fewer, Japan Bank International Corp., which is the Japanese government’s main channel for ODA, forwarded a complaint to the DoF about tax issues, specifically on value-added tax on their equipment.
Presently ODA utilization is very poor and the DoF and the Department of Budget and Management are rationalizing the country’s development financing profile.
In 2004, of the
P74 million grants entered into as revenues in the BTr, JBIC released P28 million while the International Bank of Reconstruction and Development, a financing project of the World Bank, gave in aid P22 million. Other grant givers are the United Nation Development Program and the Global Environment Facility – both of the WB and UNDP initiatives.
Compared to 2003, JBIC released
P590 million while USAID allotted P323 million. In the meantime Australia gave P113 million while IBRD donated 103 million.
Japan is still the biggest source of foreign assistance to the Philippines. With the cumulative amount of Japan ODA to the country totaling $9.4 billion, the Philippines ranks as the third largest recipient, next to Indonesia and China.
