THE GOVERNMENT is seeking a $400-million (P19.22-billion) loan from the World Bank to support financial sector reforms and boost the economy’s recovery from the pandemic.
In a World Bank document published on its website on Tuesday, the World Bank’s board directors are likely to act on the proposed “Philippines First Financial Sector Reform Development Policy Financing” by June 24.
“The proposed development policy loan supports the government of the Philippines in achieving a resilient, inclusive, and sustainable financial sector to enable a more inclusive green recovery from the coronavirus disease 2019 (COVID-19) pandemic,” the World Bank said.
The Washington-based multilateral bank said the program is the first out of two operations that will help the government boost the stability and resilience of the financial sector. This will be achieved by “addressing legal, regulatory and supervisory gaps in the financial sector and increasing the availability and mobilization of long-term finance.”
It also aimed to broaden financial inclusion among individuals and companies in the country by promoting new financial services, fast-tracking reforms, and give small businesses better access to finance.
Lastly, the loan will also be used to promote disaster risk and sustainable finance through reforms to make the economy’s recovery more sustainable.
Among the reforms that will be supported by the program includes the improvement in the country’s anti-money laundering system and in combating the financing of terrorism (AML/CFT) regime; the establishment of the Philippines Catastrophe Risk Insurance Facility (PCIF) to help nonlife insurers to implement risk management systems based on international standards; and the adoption of central bank requirements on climate risk management and governance by domestic systemically important banks (D-SIBs) to help banks assess the impact of climate change on their portfolios better.
“The COVID-19 pandemic’s economic repercussions further highlight the importance of a strong financial infrastructure and diversified financial sector to support recovery. The COVID-19 shock has increased the urgency for reforms — not only to maintain financial sector stability or increase financial inclusion but also to support sustainable economic recovery and minimize the impact of future shocks, particularly on poor and vulnerable segments of the population,” the World Bank said.
However, the bank warned that prolonged crisis is a threat to the timely implementation of the proposed program and the economic and implementation risks should be mitigated to avoid reallocation of the budget away from the main objectives. — Beatrice M. Laforga