Malacañang denies that Chinese loans have high interest

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FILE PHOTO. President Rodrigo Duterte with his Chinese counterpart Xi Jinping

Metro Manila (CNN Philippines, March 2) — The Malacañang assured that loan agreements between China and the Philippines do not carry high interest rates, after a former lawmaker revealed a "one-sided" loan from China for an irrigation project.

Citing the Department of Finance (DOF), Presidential Spokesperson Salvador Panelo said Friday that if all factors, like the project cost, denomination of loan and foreign exchange depreciation risk, were taken into account, the effective interest rates between the recent loan agreements with Japan and China "are actually quite close to each other."

Panelo added that interest rates on Chinese loans are fixed and not subject to change over time.

He also said that the country's project debt to China — which will stand at 4.5 percent of the total debt by 2022 — is just a "fraction" compared to the project debt to Japan — which will be around 9.5 percent of the total debt by 2022.

Senatorial candidate and former Bayan Muna party-list Rep. Colmenares revealed Tuesday that a hefty interest rate has been imposed on a ₱3.6 billion loan agreement between China and the Philippines for the Chico River pump irrigation project.

Among the issues he raised against the deal is its annual interest rate of 2 percent, plus an annual "commitment fee" of 0.3 percent and a "management fee" of 0.3 percent.

READ: DOF: No need to be alarmed over PH-China loan agreement

But Panelo said Colmenares was only using the issue for "media mileage" in aid of his 2019 senatorial bid.

"It is clear that the matter has been studied at length by our economic managers, particularly the DOF, unlike Mr. Colmenares who has only shown himself to be ignorant of the intricacies of finance and immature with political pettiness," he said.

In response, the former militant lawmaker said Panelo is wrong to say that he is using the issue to bolster his candidacy. He added that the presidential spokesperson was only muddling the issue.

Colmenares said that Panelo should instead answer why the Philippines granted the project to a Chinese contractor, when many Filipino contractors can also do the job, which the country's assets will be used as collateral for the loan, and why the government agreed to arbitration under a Chinese court using Chinese laws.

'PH reviewed, negotiated loan'

Panelo said that the Philippines negotiates in every loan agreement to make sure that the arbitration mechanism protects the country's interests.

He said that China provided a list of three contractors of good standing to the implementing agency of the Chico River project, which was given the opportunity to vet and request for a replacement, if needed.

Colmenares earlier questioned why China got to "impose" China CAMC Engineering Co. Ltd. to be the contractor for the project.

Panelo also said that the Monetary Board approved the terms of the loan for the Chico River project before negotiation and after the agreement was signed.

The loan was reviewed, negotiated and approved by an interagency committee composed of the Justice and Finance departments and the Bangko Sentral ng Pilipinas, he said.

The loan for the Chico River project is among the six agreements inked by the Philippines and China in April 2018.

The ₱4.3 billion project, which is expected to be completed in three years, would supply water to 8,700 hectares of land, benefit 4,350 farmers and their families, and serve 21 barangays in Kalinga and Cagayan provinces.

CNN Philippines Correspondent Xianne Arcangel contributed to this report.