The Asian Development Bank (ADB) and the <
“There is an ‘overhang’ of undisbursed loans associated with slow-moving loan components and loans which have low probability of meeting their original objectives,” says Tom Crouch, country director of the ADB’s Philippines country office.
Of the US$1.8bn in loans approved by the ADB for projects that are still under implementation, the undisbursed amount is US$1.1bn. Delayed disbursements of some loans is associated with economic uncertainty, slow progress on policy reform agendas, and administrative weaknesses, says Crouch.
“The Philippines is one of ADB’s largest loan portfolios, yet is also one of its weakest in terms of implementation,” he says. “Although the situation has been improving, much more needs to be done to ensure projects get completed on time and benefits are realised.”
The ADB is working with the government to streamline the portfolio, including redesigning some projects or cancelling part or entire loans for slow-moving projects that have little chance of implementation.
About US$300mn of the US$1.1bn undisbursed amount has been identified for cancellation this year and the number of active loans is expected to be trimmed back from 37 at the beginning of the year to 29 by December.
Crouch notes the importance of ensuring that the loan liabilities for ongoing projects are “productive”, and that underperforming activities are removed from the portfolio.
He cites as among the reasons for poor performance:
- Economic problems
- Difficulties in mobilising counterpart funds
- Weak institutional capacity of executing agencies
- Prolonged approval procedures
- Slow progress on reforms
Despite a buffeting from external and internal problems, the economy expanded by 4.6% in 2002, the fastest since the 1997 Asian crisis, driven primarily by consumer spending and buoyed by remittances from overseas workers, he says.
But investments continue to slump, while fiscal imbalance is the weak point of the economy.
The GDP outlook for 2003 has been trimmed back to 3.2-3.8% growth from 4% as a result of fallout from the regional epidemic of severe acute respiratory syndrome (Sars).
“The country’s resourcefulness will continue to be tested as the world economic outlook remains subdued,” Crouch adds.
“The good news so far this year is that the government is on track to meet the budget deficit target, inflation poses no threat, exports are holding up, as are worker remittances, and there has even been a recent softening of domestic interest rates. However, there is no room for complacency.”