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PIA Press Release
2006/10/04

World Bank approves $410-M loan package for health, education, investment projects

Cagayan de Oro City (4 October) -- Buoyed by the sustained improvements in the country’s fiscal position, the World Bank (WB) has granted a $410-million loan package to the Philippines to finance the government’s health, education, and local development and investment projects.

The loan, the biggest extended by the bank to the country in 10 years, was "made possible because of the improved fiscal situation of the country," according to WB Country Director Joachim von Amsberg.

The loan agreement was signed at the Rizal Hall of Malacanang this morning by Von Amsberg and Finance Secretary Margarito Teves in the presence of President Gloria Macapagal-Arroyo.

"Thank you very much for this biggest financing program of the World Bank for the Philippines in the last 10 years," the President told Von Amsberg and other WB officials.

The President said she hoped that the approval of the loan package signified the World Bank’s "confidence in the things that we have been doing in our economic reforms."

Von Amsberg told the President that the financing "programs are meant to help you translate the fiscal gains into services for the Filipino people, to support your program to deliver health, education, local government services, in a way that people can see that tax payments lead to public services."

"We have committed this $410-million package, the largest in recent years, which has become possible because of the improved fiscal situation of the country," he said.

The low-interest loan is payable in 20 years.

Health Secretary Francisco Duque III, Land Bank of the Philippines acting President Gilda Pico, WB and Department of Education (DepEd) officials also witnessed the signing ceremony.

The loan package is broken down into $200 million for National Program Support for Basic Education, $110 million for National Sector Support for Health Reform Project, and $100 million for the Strategic Local Development and Investment Project.

At the roundtable discussion following the signing of the loan agreements, Von Amsberg noted the country’s improved fiscal situation and economic reforms, which have led to increased revenue collections and debt payments.

He said that with a more sustainable fiscal situation, the Philippines can benefit from increased volumes of low-cost financing from official lenders such as the World Bank.

He added that the three financing programs will support the government’s reform agenda on health and education as well as investments in well-managed local governments.

Von Amsberg pointed out that WB financing is intended to help improve the quality of public spending in infrastructure and the social sectors, through transparent budget formulation and execution, effective control of corruption, and effective targeting of expenditures to areas in greatest needs, and programs with the highest impact.

The President underscored the importance of the basic education support, saying that some P200 million worth of school buildings destroyed by Typhoon "Milenyo" in the province of Sorsogon alone have to be repaired or reconstructed.

The loan to the education sector will also help close the classroom backlog in the country, she added.

The President said that the loan for health services will benefit more poor Filipinos through the Philippine Health (PhilHealth) insurance program.

The Department of Education (DepEd) and the Department of Health (DOH) will implement the education and health programs, respectively.

Both programs are designed to support strategic priorities in the national budget to help both DepEd and DOH improve governance and finance expenditures critical in the delivery of health and education services.

These loans follow a new modality under which the World Bank directly finance high-priority line items under the regular national budget.

This modality was introduced in response to the Philippine government’s request to move away from traditional project-based development assistance and toward a more programmatic and streamlined approach to support national priority programs.

The third loan of $100 million to the Land Bank of the Philippines (LBP) will provide financing to local government units (LGUs) to help them improve local public services and carry out strategic investments for infrastructure and social services.

This program will also finance revenue improvement and enhancement programs for LGUs, including fiscal and management to ensure financial sustainability.

It will also finance capacity building programs of the participating LGUs, and assistance in project preparation and implementation.

LGUs play a key role in reducing poverty incidence in the country. (OPS/PIA-10) [top]

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