The series of DPLs supports policies that would, by the end of 2009, lead to the following benefits: Sustained progress towards fiscal sustainability and public debt reduction Improved and more transparent revenue collection through better management and administration of the VAT Better management of government expenditures and more transparent, efficient and effective delivery of social programs and services in reaching the poor and other vulnerable groups, which will result in better social outcomes Higher investment led by the private sector, facilitated by strategic public spending in vital infrastructure, to enable robust and sustainable growth Increased transparency, greater accountability of government funds, simplified administrative procedures, greater civil society involvement in the monitoring and evaluation of public programs, and other steps towards curbing corruption |
Contacts
In Manila: Leonora Aquino-Gonzales (632) 917-3003 lgonzales@worldbank.org;
Anissa Tria (632) 917-3013 atria2@worldbank.org
In Washington: Mohamad Al-Arief (202) 458-5964 malarief@worldbank.org MANILA, December 22, 2006 – The World Bank’s Board of Executive Directors today approved the First Development Policy Loan for the Philippines (DPL) in the amount of US$250 Million. The DPL supports the country’s significant achievements and further actions in reducing public sector deficit and debt by strengthening tax administration, improving budget execution and fiduciary performance, and strengthening the finances of the power sector. In particular, this loan supports the turnaround in public finances that the Philippines has achieved through reducing the fiscal deficit by 3% of GDP since 2004. This achievement is based on the VAT reform and power sector tariff reforms. It will also help strengthen the investment climate and improve service delivery through increased, more transparent and effective spending in social programs, specifically, in health and education sectors. The World Bank provides DPLs on the basis of good economic management and policy reforms. This DPL is the first such loan by the World Bank in eight years. The loan disburses in a single tranche to finance regular budget expenditures of the Government. “The approval of this first DPL is a clear recognition by the World Bank of the major reforms we have undertaken to improve our prospects for growth. With the deficit numbers on a decline, we have entered a virtuous cycle of lower borrowing, leading to a reduction in debt service and generating more resources for infrastructure and social services,” said Finance Secretary Margarito Teves. “The Government remains committed to sustained reforms and prudent fiscal management that result in better quality of public expenditures,” Secretary Teves explained. This first DPL lays the groundwork for supporting deeper reforms in the areas of fiscal consolidation, governance and the fiduciary environment, the investment climate, and social policy. If adequate reforms progress continues, subsequent DPLs are envisaged to follow an annual schedule. The Asian Development Bank, the Japan Bank for International Cooperation, the Australian Agency for International Aid as well as other development partners have participated in the preparation of the program. “We are very happy to support the Philippines with policy-based lending, for the first time since 1998. The series of DPLs recognizes the improvements in public finance and provides support for continuing sound fiscal policies for the years to come. Further fiscal improvements will come from more transparent and equitable collection of taxes and more effective tax enforcement,” said World Bank Country Director, Joachim von Amsberg. “The DPL series supports very significant measures to improve budget transparency and thus help the fight against corruption. Most significant are the increased transparency in public procurement and Government commitments to release to the public on a regular basis budget expenditure, allotment, and cash release data. This data will allow citizens to track the use of public funds and thus reduce the risk of misuse and corruption,” Mr. von Amsberg explained. “We expect that improved economic performance and better quality of public management of resources will lead to more and better services for the poor, especially in education, health and other social services,” the World Bank Country Director continued. The amount of US$250 million will be disbursed in a single tranche after loan signing, as all policy actions supported by the loan have already been completed at this time. The loan will be in US dollars and will be repaid in 20 years with an eight-year grace period. The current indicative interest rate for the loan is LIBOR plus 25 basis points and thus significantly lower than the interest on market borrowing by the Philippines. Last October, three loan agreements totaling US$410 million for better basic education, health services, and more LGU investments, were signed with the World Bank and the Philippines. The combination of three loans and this first DPL is the biggest package of assistance from the World Bank for the Philippines in recent years.
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