The World Bank is committed to extend to the Philippines more loans, possibly blended with grants to slash interest costs, in order to bankroll flood control as well as climate change mitigation and adaptation projects as extreme weather poses a bigger threat to Filipino lives and livelihoods.
Gonzalo Varela, World Bank lead economist and program leader of the equitable growth, finance and institutions practice group for Brunei, Malaysia, the Philippines and Thailand, told reporters that they expect the new lending program for the Philippines covering the next four years to "keep growing" similar to the substantial growth in the past few years.
A document seen by Manila Bulletin showed that the World Bank board had calendared to approve by Dec. 10, 2024 its Philippines Country Partnership Framework for 2025-2028—the financing program as the country climbs to upper middle-income status.
To recall, the Philippines became the World Bank's No.1 borrower with $3.07 billion in loans during the Washington-based lender's fiscal year 2021, at the height of the country's worst post-war recession wrought by the Covid-19 pandemic. These low-interest loans were mainly spent to combat COVID-19, which inflicted the biggest pandemic-induced output gap in the region of the Philippines.
In fiscal year 2022, the Philippines borrowed a lower $1.58 billion from the World Bank, the seventh largest among International Bank for Reconstruction and Development (IBRD) clients.
Then, in fiscal year 2023, coinciding with President Marcos’ first year in office, a higher $2.34 billion was borrowed from the World Bank—the fifth biggest in the IBRD—consisting of six loans to be repaid between 2028 and 2052.
Varela said on the sidelines of the Management Association of the Philippines' 22nd International CEO Conference last Tuesday, Sept. 10, that flood management infrastructure projects will likely be part of the 2025-2028 country partnership framework, under its goals to build resilient communities and preserve environmental sustainability.
In particular, Valera said the country needs drainage systems that can contain high levels of precipitation.
The recent strong typhoons that battered the country brought flooding to many low-lying places, damaging properties and stopping businesses' operations in affected areas.
The World Bank's Philippines Climate Change Development Report in 2023 showed that 82.7 percent of Filipinos are exposed and 69.1 percent are vulnerable to climate change impacts. It also estimated that extreme weather and rising temperatures may slash the Philippines' real gross domestic product (GDP) by four to 11 percent by 2050.
As such, "we are going to put particular attention to adapting to climate change," Varela said.
"In the objective that is related to achieving inclusive growth and job creation, a key element there is what happens in agriculture—because it's heavily affected by climate risks. And so infrastructure in agriculture, so that farmers have better technologies to cope with climate change, is something we're going to finance heavily in the next cycle" of World Bank lending for the Philippines, he added.
These will form part of the "resilient infrastructure" investments that Valera said are crucial for the Philippines to fight the socioeconomic challenges caused by natural disasters. “On this front, the public sector, both national and local, will need to step up," he said.
As the Philippines moves to the upper middle-income status making the cheaper loans it currently avails less available, Varela said it will help that interest rates are expected to decline amid a global monetary easing cycle, which "will also impact on the cost of financing that the World Bank is going to offer" to the Philippines in the coming years.
Also, given the focus of other development institutions on climate finance, "we can bring in not just our [loan] financing but also trust funds from donors," Varela added.
That way, the World Bank can support the Philippines' key investments in climate adaptation and mitigation with reasonable interest rates from a blend of loans and grants—usually free, hence reducing repayment costs, Valera said.
However, Valera conceded that available financing is dwarfed by the trillions of dollars needed yearly to fund climate projects globally.
"The [World] Bank and other multilateral institutions have been working hard to do better with our balance sheets so that we can lend more and also bring in different players—in particular, the private sector—to combine forces and just be up to the challenge" posed by climate change, according to Valera.