Manila, Feb 9, 2007 AEST (ABN Newswire) - A US$250 million ADB loan to the Philippines will support a series of reforms aimed at improving the investment climate, better managing the country's finances and helping the poorest and most vulnerable members of society.
"The Development Policy Support Program will help the Government of the Philippines further expand the size of its economy, cut poverty and create jobs," said Tom Crouch, ADB's Country Director for the Philippines.
Robust economic growth and an improved fiscal situation have begun to enhance investor perceptions about the medium-term outlook for the Philippine economy. There has been a rise in capital flows, and the Philippine peso has appreciated by about 6.7 percent against the US dollar since the start of the year.
All three major international rating agencies have improved their outlooks for the Philippine economy. Fitch and Standard & Poor's improved their outlooks for Philippine sovereign credit from negative to stable in early 2006, followed by Moody's, which upgraded its negative outlook to stable in October.
After carrying out difficult tax and fiscal measures, the country's consolidated public sector deficit declined from a peak of 5.2 percent in 2003 to an estimated 0.9-1.0 percent in 2006. The improved fiscal situation has been driven in part by increased tax revenues, which are set to rise by about 1 percent of GDP in 2006. This is the first increase of any significance in a decade.
Despite the progress, challenges remain. Employment growth has been modest and it has to grow more to off-set the increased size of the workforce. Poverty rates are falling but they remain high.
The Development Policy Support Program will aid the Government's attempts to address these problems through its Medium Term Philippines Development Plan. The plan focuses on key reforms that will bring high and sustainable economic growth, poverty reduction and job creation.
The reforms supported by the program are designed to restore fiscal sustainability, maintain economic stability, and improve creditworthiness by strengthening tax collection and administration, cutting inefficient spending, and strengthening the country's debt management strategy. The program will also support the Government's anti-corruption initiatives in the revenue-collecting agencies of the Bureau of Internal Revenue and Bureau of Customs.
"Strengthening tax collection and management, as well as reducing corruption, will enable the Government to spend more on programs which help the neediest members of society," said Mr. Crouch.
The loan will have a 15-year term, including a grace period of three years, with interest determined by ADB's LIBOR-based lending facility.
Contact
Jason Rush
Email: jrush@adb.org
Tel:+632 632 6480; Mobile: +63 920 938 6490
Rita Festin
Email: rfestin@adb.org
Tel:+ 632 683 1006; + 63917 8884949
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