Bill seeking to leverage ODA with other funding sources filed in House
A BILL seeking to remove the exclusivity of official development assistance (ODA) in funding Philippine projects has been filed in the House of Representatives.
House Bill No. 7135 proposes a “blended financing” model with an ODA component mixed in with other financing sources.
Albay Rep. Jose Ma. Clemente S. Salceda, the House ways and means committee chairman who filed the bill, said the measure also gives local government units access to ODA in a revamp of the rules for contracting of ODA loans.
The bill will allow blended financing if the partner government, bilateral or multilateral agency or lending institution mobilizes financing from private or commercial institutions in funding the loan or grant.
Speaking at the committee hearing on Monday, French ambassador to the Philippines Michéle Boccoz said that the current rules “limit the definition of ODA to projects fully financed with sovereign loans which restricts significantly the list of potential partners for the Philippines.”
“This limitation also restricts European partners’ ability to provide expertise in many areas where cooperation would also contribute to support and investment in the Philippines,” she added, citing the example of a French company looking to develop a shipyard in the Philippines for €25 million.
The bill seeks to amend Republic Act No. 8182, which according to Mr. Salceda, “does not explicitly provide a mechanism for ODA in the blended financing approach,” and restricts “bilateral (especially European) partners’ ability to provide their expertise in many areas where cooperation could contribute to the development of the Philippines,” he said in a statement.
If signed into law, the bill would reduce the ODA grant component to 15% to allow more flexibility in financing.
The bill also proposed to cap the effective interest rate “and the terms on the loan or loan component, including private or commercial financing mobilized by bilateral or multilateral partners,” at 7%, or a rate and terms deemed concessional by the Department of Finance.
The effective interest rate will incorporate project management costs and other costs incurred in contracting the ODA.
Liabilities that subnational governments may sustain from ODA loans, even those arising from exposure to foreign currency risk, will be subject to restrictions as prescribed by the Bureau of Local Government Finance, according to the bill.
Mr. Salceda noted in his explanatory note that some 43.93% or P1.663 trillion of the Philippines’ external debt was contracted through ODA.
ODA loans contracted between Jan. 1, 1995 and Dec. 1, 2023, will follow the existing rules. If enacted, loans contracted after Jan. 1, 2024 will follow the bill’s rules. — Beatriz Marie D. Cruz