The Export-Import Bank of China (China EXIM) may possibly push for higher interest rates should the Philippines renegotiate and pursue the loan agreements for three railway projects.
Former Finance Secretary Carlos Dominguez, citing Finance Undersecretary Mark Joven, said CEXIM has yet to specify the financing cost it intends to offer.
“However, CEXIM has stated that it intends to extend loans while recovering at least marginal funding cost,” Joven said in a message shared by Dominguez to reporters over the weekend.
“At present, as US dollar benchmark interest rates have increased to around three percent, CEXIM will push to recover this funding rate at the very least,” he added.
News reports over the weekend quoted Cesar Chavez, Department of Transportation (DOTr) undersecretary, saying that according to Dominguez, CEXIM was asking for three percent interest on the loans.
“The prudent path would be to ascertain that the cost of the debt be less than economic returns of the project financed,” Dominguez said.
“Every effort on the Philippines’ part was made to finance these projects was based on favorable terms and conditionalities broadly comparable with loans from other sources,” Dominguez added.
Last week, Chavez said as per Dominguez, the loan applications for three rail projects namely the Calamba to Bicol (P142 billion; Subic to Clark (P51 billion); and Tagum-Davao-Digos amounting to P83 billion.were cancelled “instead of keeping it in suspended animation.”
The submitted loan applications were only valid up to May 31, 2022, and were not approved.
According to Chavez, the Department of Finance (DOF) advised CEXIM the loan applications for these contracts are deemed automatically withdrawn.
The DOTr said it has coordinated with the DOF to initiate policy discussions on the way forward for the three rail projects.
“The new administration can revisit the projects. If found worthwhile, it may choose to restore the loan application. If funding is still available,” DOF Secretary Benjamin Diokno said last week.
According to a Reuters report yesterday, President Ferdinand Marcos Jr. has ordered the DOTr to renegotiate the loan agreements for the railway projects.
The Subic-Clark railway covering Bataan and Pampanga, is a 71-km freight railway connecting Subic Bay Freeport Zone and Clark Freeport Zone.
The PNR South Long Haul project from Banlic, Calamba to Daraga, Albay will span 39 cities and municipalities, four provinces, and two regions.
The P83 Tagum-Davao-Digos rail comprises the first segment of Mindanao Railway, a 100-km railway line is designed to accommodate 122,000 passengers. – Angela Celis
