THE Department of Transportation has adopted a “Multi-Tranche Financing Structure” for the country’s railway projects since 2016 to optimize financing cost, particularly to reduce commitment fee (CF) imposed by foreign lending firms on the undisbursed portion of loans.
In response to Malaya-Business Insight’s story on the Commission on Audit report that prolonged implementation of 15 foreign-assisted projects and have incurred P154.2 million additional commitment fees, DOTr Assistant Secretary Goddes Hope Libiran said CF in ODA loans are not necessarily due to project implementation delays, and CF will be incurred even if a project is on schedule.
Libiran said all ODA loans for railway projects from 2016 to date have adopted a “Multi-Tranche Financing Structure” wherein the total loan amount needed for a project is not made effective all at once in the beginning.
“To illustrate, while the loan amount needed for the Malolos-Clark Railway Project is $2.75 billion, only a first tranche of $1.3 billion was made effective in September 2019, while the second tranche of $1.45 billion will only become effective in 1Q (first quarter) 2022,” Libiran added.
This means that an additional $1.45 billion has been committed by Asian Development Bank (ADB) for the project and the CF is not yet accruing on this second tranche amount since it will only become effective in the first quarter next year, according to DOTr. The COA report showed that Malolos-Clark Railway project has incurred the biggest CF totaling P102.77 million.
CF for the ADB loan for the Malolos-Clark project is 0.15 percent per annum on “undisbursed amount” while interest on “disbursed amount” is currently 0.84 percent per annum, the DOTr said.
To finance the railway network expansion program since 2016, the DOTr’s railways sector has secured P1,507 trillion in official development assistance (ODA) financing, including P350 billion in signed and effective loans, P1.142 trillion in financing commitments and P14.5 billion in technical assistance and other grants from various ODA partners as of July 2021.
The DOTr said while the Philippines is still qualified for cheap developmental loans from its ODA partners, ODA loans and their corresponding CFs will remain an optimal funding source for the government’s needed investments.
