The government is planning to raise funds, including the possible issuance of “reconstruction bonds,” to rebuild large areas ravaged by the recent typhoons, President Arroyo said Wednesday.

Addressing the business community in a forum in Makati City, the President said the government will prioritize seeking foreign grants and concessional loans for the reconstruction of damaged roads, bridges, and other infrastructure.

Commercial borrowings such as the issuance of reconstruction bonds, however, will be the last option in a bid to prevent the widening of the budget deficit, according to the President.

The government’s financing plans were laid out by Mrs. Arroyo a day after she created a special public-private commission that will tap fresh foreign aid and oversee the rehabilitation efforts in calamity areas.

the new group, headed by PLDT chairman Manuel "Manny"

Pangilinan with Finance Secretary Margarito Teves and Cebu Archbishop Ricardo Cardinal Vidal as co-chairman, is expected to hold a pledging session to seek grants and aid next month, in cooperation with the United Nations and the World Bank.

"Depending on the recommendation of the special commission, we may issue reconstruction bonds whether peso or dollar; to which the multilaterals, such as the World Bank and the ADB, may subscribe to," the President said.

She did not give any target amount from the reconstruction bonds that will be coursed through the state-run National Development Corporation.

"Commercial borrowings either through bonds or other instruments should be the last financing option," she said.

However, Trade and Industry Secretary Peter Favila said they are looking at a P50 billion reconstruction bond issuance through the NDC.

The President explained that the government does not want to let grant opportunities and concessional loans go to waste, adding such financial options remain substantial. She said they want to go beyond a mere borrowing program "to provide a developing framework that is required by official development programs."

"In sum, we will be pushing first for more grants and non-repayable inflows," she said, adding that the Philippines is a victim of climate change and that victims should be "compensated, not penalized with higher interests and unconditionalities."

On seeking concessional loans, the President said she expects Congress to pass a joint resolution to authorize the government to avail of "unprogrammed provisions" as local counterpart of the loan package. The congressional resolution, she added, is now up for plenary discussions.

"On the part of economic management, we want to reduce debt to GDP ratio which is why we would rather have grants than loans and we would have a government agency issuing bonds than the national government itself," she said.

"We want to reduce the debt to GDP ratio so we can stop wasting our resources on debt service and so we can maintain higher spending for infra and human capital as we have done before and during the global food, economic, and now climate change crisis."

Mrs. Arroyo likewise said she is "very grateful" to the United Nations for the "flash appeal" that has mobilized grants for rehabilitation in typhoon-hit communities in Luzon.

The special pledging session to be spearheaded by Teves and the reconstruction commission, meantime, would tap into the huge underlying global constituencies for climate change adaptation, according to the President.

"It woul capitalize on the ongoing discussions and negotiationns leading to Copenhagen. In fact, the RP case is being cited as proof for the need for adaptation financing. That is why we should use the umbrella not only of the World Bank but also the UN framework," she said.