China-backed AIIB extends $750 million loan for PH coronavirus response

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The China-led Asian Infrastructure Investment Bank has approved a $750 million (about ₱38 billion) loan to fund COVID-19 response efforts in the Philippines, subject to certain conditions.

Metro Manila (CNN Philippines, May 29) – The China-led Asian Infrastructure Investment Bank has approved a $750 million (about ₱38 billion) loan to fund COVID-19 response efforts in the Philippines.

The regional lender based in Beijing announced Friday the approval of the fresh credit line from its COVID-19 Crisis Recovery Facility offered to member-states, alongside a parallel $1.5 billion (about ₱75 billion) loan from the Japan-backed Asian Development Bank.

The loan was secured by the Department of Finance. Discussions for the loan started April 30 and was approved in a month. Full fund disbursement is expected by May 2021, with specific milestones set in the loan documents.

"The program will provide critically needed support to help the Government of the Philippines mitigate the severe health, social, and economic impact caused by the COVID-19 pandemic," according to the program summary posted on the AIIB website.

The loan sets specific deliverables for the national government. By May, the country's testing capacity should be at 8,000 per day. Presidential Spokesperson Harry Roque said last week that the government's capacity is now at 32,100, although actual tests done by the Department of Health and licensed laboratories logged below 10,000 the past few days.

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The AIIB also required the Philippines to use the funds to shorten the testing process to 48 hours or less and provide PhilHealth insurance coverage for coronavirus patients and all local health workers.

The first epicenter of the coronavirus outbreak was Wuhan City, China.

The loan terms also mandate that emergency subsidies be provided to 18 million families by July. By December, the government must already provide $600 million (about ₱30 billion) as wage subsidies and tax relief to at least a million small business employees.

These are similar to existing cash aid programs of the Duterte administration, which is currently funded by realigned cash from the national budget. Authorities say funds are running low.

The Chinese lender added that the Philippines must stretch the doubling rate of COVID-19 cases to at least 30 days by December, longer than the three to four day average in early April. Poverty incidence must be held to less than 18 percent by April 2022 despite thousands of workers displaced by the outbreak this year, as well as the submission of government reports on the distribution of subsidies.

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President Rodrigo Duterte previously slammed foreign aid entities like the United Nations and the European Union for extending loans and other benefits with strings attached, claiming they meddled with Philippine affairs in calling out reported human rights violations under his watch.

READ: PH resumes accepting aid from countries that backed UN drug war probe

The newest loan is part of the state's ₱426.9-billion borrowing plan, which will ensure the government has enough cash for quick fund releases and its economic recovery program.

The World Bank and ADB are the other major sources of credit. These debts will be eventually repaid using taxpayers' money.

Duterte took an early pivot towards China just months into assuming his post, saying he considers President Xi Jinping a close ally.

The Philippines has long been protesting China's aggressive encroachment in features of the West Philippine Sea, even if an international arbitral tribunal already dismissed China's sweeping ownership claims of these islands.