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THE
low-interest-rate regime has made more difficult the
tapping of even official development assistance or ODA
loan packages and has forced government to lobby for a
reduction in foreign exchange risk cover, one of two
determinants to the bank’s cost of funds.
Development Bank of the Philippines president and chief
executive officer Rey G. David said failure to get
favorable action from sources as the World Bank and the
Japan Bank for International Development, for instance,
would force them to borrow locally instead.
DBP has
already extended ODA loans totaling P144 billion since
1989 and looks forward to disbursing another P37.5
billion more this year.
“ODA
packages work best in a high-interest rate environment.
We are dancing with our ODA fund sources to try to get a
reduction in forex cover,” David said in a briefing he
called Wednesday.
ODAs
cost far less than a commercially obtained loan,
typically no more than 1 or 2 percent if sourced from
JBIC, 4 or 5 percent if from the World Bank and the
United States Assistance for International Development
and around 3 percent from the government of Germany.
But the
cost of the loan piles up as a 1-percent government
guarantee fee is added to the mixture plus some 4
percent to answer for so-called currency conversion
risk.
It all
means an ODA package actually costs a borrowing entity
such as DBP anywhere from 6 percent to 10 percent, David
said.
To
sustain DBP’s development thrust, the forex cover has to
go down, maybe by 2 percentage points at least, he
added.
“There
is basis for going after a yen ODA but since we cannot
dispense with the sovereign cover, the winning
‘positive’ here will be the duration of the loan,” David
stressed.
He meant
that if JBIC were to extend DBP a loan at a rate that
was attractive, then the Japanese has to structure the
loan five years or even longer.
David
ruled out not tapping JBIC for ODAs on the basis of
costs alone, go somewhere else whose funds were cheaper
and come back when the time was ripe.
“We’re
not fair-weather friends to the Japanese. The key here
has to be the [loan] duration,” he reiterated.
David
vowed to channel the ODAs to strategic sectors
considered crucial to the country’s development.
“We
intend to tap more foreign funds, if needed, for the
purpose of jump-starting the various initiatives of the
government,” he said. |
