ADB approves $400-M loan to boost Philippine capital markets

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Metro Manila (CNN Philippines, May 26) — The Asian Development Bank (ADB) has approved a $400 million, or roughly ₱20 billion loan to the Philippines to boost government's efforts to strengthen local capital markets.

The multilateral lender said Tuesday the Support to Capital Market-Generated Infrastructure Financing Program is aimed at addressing "key constraints that have limited the growth of domestic capital markets, especially government and corporate bond markets."

"It also focuses on building a vibrant domestic institutional investor base that will become a sustainable source of long-tenor infrastructure finance," the ADB said in a statement. "By boosting infrastructure finance, the capital market development program will support higher public infrastructure spending for years to come."

Under the administration's “Build Build Build” program, government planned to increase public spending on infrastructure to 7.0 percent of gross domestic product by 2022, up from 5.5 percent in 2018 and an average of 2.8 percent in the last three decades.

Finance Secretary Carlos "Sonny" Dominguez III earlier said that the government should focus on infrastructure developments, as it will be the country's "fuel" for an economic "bounce back" amid the coronavirus pandemic.

ADB Vice-President Ahmed Saeed said "resilient and vibrant capital markets are key to achieving economic development, growth, and poverty reduction as set out in the government’s long-term strategy AmBisyon Natin 2040."

"By developing domestic capital markets, funds are generated to support higher levels of long-term investments and sustainable quality job creation," Saeed said. "The program approved today will support the Philippine government’s development goals, including its response to the COVID-19 pandemic."

According to the ADB, "the capital markets development program has supported various reforms in recent years, including the launch and implementation of the first government-led, comprehensive domestic bond market development plan."

"The Philippines also has modernized its government debt trading infrastructure and provided a reliable yield curve to support the pricing of private sector debt instruments," the ADB added.

With this new loan, total lending from the ADB has reached $2.1 billion, or roughly ₱106 billion for 2020, which provides for the state's COVID-19 response measures.