Bill reforming Official Development Assistance process clears House of Representatives


THE House of Representatives has endorsed for Senate approval a measure setting standards for the contracting of loans and grants with bilateral and multilateral partners.

This, after lawmakers approved on third and final reading House Bill 7311, which seeks to amend Republic Act 8182 or the Official Development Assistance of 1996.

The bill seeks to expand the country’s Official Development Assistance portfolio, which is critical to fiscal stability and funding of long-term priorities.

The bill enables private and commercial institutions to fund the ODA through the blended financing approach.

It also provides that the donor government shall issue a guarantee covering at least 75 percent of the commercial component of the loan.

The measure requires that the lending government, bilateral or multilateral agency, or international or multilateral institution, shall guarantee the timely release of funds committed by their partner-private or commercial institutions.

HB 7311 reduces the ODA grant component from 25 percent to 15 percent to attract more ODA, considering that it remains more attractive as a financing option than alternatives.

It also removes the 40-percent requirement for the weighted average grant element of all ODA loans.

The bill allows local governments to access ODA loans and tax relief while authorizing the Department of Finance to determine the rate and terms that are concessional.

It also retains the terms and conditions for ODA contracted prior to these amendments, but permits unutilized balances to be used for other loan agreements.

Lastly, the bill requires that all ODA projects shall be subject to evaluation and approval of the National Economic and Development Authority-Investment Coordination Committee taking into consideration the project’s compliance with environmental, social and governance standards.

Earlier, House Committee on Ways and Means Chairman Joey Sarte Salceda, principal author of the bill, said that expanding the country’s ODA portfolio is particularly important, “due to their nature as long-tenured, deeply concessional loans with a more diplomatic character.”

“ODA loans allow for the financing of programs and projects where economic returns are not necessarily immediately realizable, or where a viability gap would make a certain project less financial to the open capital markets or to private or commercial institutions,” Salceda said.

Salceda noted that interest rates through ODA loans are much lower than commercial rates, even if the grant component is adjusted.

“As of December 31, 2021, some 43.93 percent or P1.663 trillion of our external debt is contracted through ODA. The Weighted Average Maturity (WAM) of the entire outstanding ODA loan portfolio, including the undrawn loan commitments that are yet to be availed/repaid in subsequent years, is estimated at 20.80 years,” he said. 

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