The Philippines is seeking to extend the World Bank loan aimed at addressing widespread stunting among Filipino children, as the project stalled due to national budget bottlenecks—the same issue that has hampered other foreign-assisted projects in recent years.

A restructuring paper for the Philippines Multisectoral Nutrition Project, disclosed by the World Bank on Oct. 7, showed that the Philippine government requested a one-year extension of the loan closing date from the current June 30, 2026, to June 30, 2027.

Out of the $178.1-million investment project financing (IPF) approved by the Washington-based lender in June 2022—making it the last loan secured by the Duterte administration—$137.22 million, or 77.04 percent of total, has been disbursed so far.

The four-year project, which is jointly implemented by the departments of Health (DOH) and of Social Welfare and Development (DSWD), is “on track” to achieve its development objectives, the World Bank said.

The project aims to enhance the use of nutrition-specific and nutrition-sensitive interventions, as well as promote key behaviors and practices proven to reduce stunting in targeted local government units (LGUs).

In 2021, the World Bank reported that the Philippines was suffering from a “silent pandemic”—childhood stunting resulting from undernutrition. Stunted children are smaller in height compared to healthier same-aged peers.

Pre-pandemic, 29 percent of Filipino children aged five and below were stunted, World Bank estimates in 2019 revealed. The Philippines had the fifth-highest stunting prevalence in the East Asia and Pacific (EAP) region and was in the top 10 globally.

Stunting has been largely attributed to micronutrient deficiencies among infants, children, and pregnant women. The Covid-19 pandemic also likely aggravated stunting and undernutrition in the country, according to the World Bank.

However, the World Bank lamented that “although the project continues to perform well, there have been delays in counterpart budget availability.”

“While a financing plan was included in the proposal approved by the Investment Coordination Committee (ICC) of the Department of Economy, Planning, and Development (DEPDev), the Department of Budget and Management (DBM) did not adhere to this plan,” the lender said.

“Additionally, the funds released by the DBM were classified as ‘unprogrammed appropriations (UAs),’ requiring the DOH and the DSWD to submit a special budget request (SBR). The process of submitting the SBR and obtaining the special allotment release order (SARO) resulted in considerable delays that affected project implementation,” it added.

Since UAs are not covered by regular budget financing, they can only be funded by excess or new tax and non-tax revenues, as well as foreign loans for specific projects and programs.

“Funds were often not made available by the DBM until several months into the fiscal year, preventing the timely implementation of project activities and resulting in the delay of planned activities,” the World Bank said.

In particular, “the contracts with UNOPS [the United Nations Office for Project Services] have been implemented with significant delay.”

“All packages expected to be delivered are between three and 24 months behind schedule. These setbacks adversely affected overall project implementation progress, particularly the fulfilment of commitments under the PBGs [performance-based grants] by LGUs,” according to the lender.

As such, the Department of Finance (DOF), which was the borrower on behalf of the Philippine government, last Aug. 14 requested loan restructuring and extension.

“The extension is intended to address initial implementation delays caused by the late release of funds from the government of the Philippines and setbacks in the delivery of commodities and services under the UNOPS contract, which have now either been addressed or have a clear timeline for completion,” the World Bank said.

With the proposed closing date extension and revision of some of the project’s performance indicators, the World Bank expressed optimism that restructuring “will provide sufficient time to fully deliver all activities under the UNOPS contract” as well as “facilitate a seamless transition to a follow-on nutrition project expected to be approved in the third quarter of calendar year 2026.”

Last August, Budget Secretary Amenah F. Pangandaman assured that big-ticket foreign-assisted programs and projects will no longer suffer setbacks, given the budget cover included in the proposed ₱6.793-trillion 2026 national budget.

“Loan proceeds and the Philippine government’s counterpart financing are already incorporated in the respective budgets of the implementing agencies,” Pangandaman had told Manila Bulletin.

Based on 2026 budget documents, a total of ₱283.3 billion in foreign-assisted projects will be funded under next year’s spending plan.

Of this amount, over ₱82 billion in counterpart government funds will support ₱201.3 billion in loan proceeds.

Next year’s allocation for foreign-assisted projects is more than four times larger than this year’s ₱66 billion, which consists of ₱30.7 billion in counterpart public funds and ₱35.3 billion in loan proceeds.

It also helps that UAs in the 2026 budget proposal dropped to ₱249.9 billion, from ₱363.4 billion this year and ₱531.4 billion last year.