The Philippine government is set to cancel part of its loans from the World Bank and the Asian Infrastructure Investment Bank (AIIB) for the long-delayed Metro Manila flood control project and overhaul its implementation plan, as slow disbursement and construction setbacks raise doubts about completing critical infrastructure on time.

In an aide memoire seen by Manila Bulletin, the Washington-based World Bank said Philippine authorities agreed to restructure the Metro Manila Flood Management Project, including changes in scope and the cancellation of $2 million—$1 million each from the World Bank and the AIIB—in loan proceeds following persistent implementation bottlenecks.

“Details of the project restructuring were defined based on an agreement reached between MMDA [Metropolitan Manila Development Authority] and DEPDev [the Department of Economy, Planning, and Development] in a meeting on Dec. 15 [of last year]. The project changes, in effect, scope changes and cancellation of $2-million loan proceeds, will be documented through a notification to the DEPDev-ICC [Investment Coordination Committee],” the World Bank said in the aide memoire documenting the implementation support mission held from Nov. 3 to Dec. 1, 2025.

MMDA and the Department of Public Works and Highways (DPWH) were expected to formally submit the restructuring notification to the ICC by end-January this year, with review and approval taking up to two months.

The move comes as the $500-million flood mitigation initiative struggles with slow fund utilization and delayed construction, even as the November 2026 loan closing deadline approaches.

Based on the latest implementation status and results report published last January, $116.26 million, or 62.86 percent, of the reduced $184.94-million World Bank loan for the project has been disbursed, leaving $68.68 million to be spent before the financing closes on Nov. 30 this year.

From the lowered counterpart financing provided by the China-led AIIB, also amounting to $184.94 million, $115.66 million, or 62.54 percent, has been disbursed so far, leaving $69.28 million in undisbursed funds about 10 months before they expire.

In the aide memoire, the World Bank flagged persistent disbursement bottlenecks, citing that “delays in replenishing the $50-million DA [designated account] have resulted in slow disbursement rates,” underscoring weaknesses in financial and project management.

Implementation progress has also been hampered by contractor issues, permitting delays, and unresolved resettlement cases, prompting the World Bank to downgrade the project’s implementation progress rating to “moderately satisfactory.”

Key flood control infrastructure, including pumping stations and drainage upgrades, has faced delays due to contractor license revocations, permit acquisition problems, and logistical constraints in densely populated areas.

The restructuring includes canceling approximately $2 million in loan proceeds tied to changes in the solid waste management component, particularly the shift away from a centralized materials recovery facility (MRF) toward alternative waste treatment technologies, specifically the black soldier fly (BSF) technology.

The World Bank warned that implementing agencies must accelerate procurement and construction activities to meet the project’s closing deadline, emphasizing that remaining works may need to be completed using government funds if delays persist.

As Manila Bulletin reported earlier, the Philippine government and the World Bank in November 2024 signed amendments to their loan agreement for the original $207.6-million project financing, including a two-year extension of the originally seven-year implementation period, which was supposed to lapse in 2024.

In 2017, the Philippines borrowed a combined $415.2 million from the World Bank and the AIIB to bankroll most of the project’s cost, which was originally intended to protect 1.7 million Filipinos living near 56 “potentially critical” drainage systems across 11,110 hectares (ha) of flood-prone areas in the National Capital Region (NCR).

Through the national budget, the government was to shoulder the remaining $84.8 million for the flood control project, which is jointly implemented by the Department of Environment and Natural Resources (DENR), the DPWH, and MMDA.

Implementation, however, has been sluggish, beginning with project design issues and delays in determining the number and location of drainage and pumping station sites. Red tape also slowed procurement.

Because of prolonged rollout, the Philippines missed its original target of completing the project in 2024, which was meant to ensure that targeted NCR areas would be free of floodwaters within 24 hours after major rainfall.

Had the project been implemented as scheduled, flooding experienced in the aftermath of recent strong typhoons that battered Metro Manila could have been mitigated.

In addition to extending the loan closing date, the World Bank also agreed to the Philippine government’s proposal to cut $22.7 million each from the two lenders’ counterpart financing.

Despite the scaled-back loan amounts, the Philippines will continue repaying the concessional, or low-interest, loans over a 25-year period, inclusive of a 14-year grace period under the original 2017 agreement.

Loan restructuring documents reviewed by Manila Bulletin in 2024 partly blamed stringent Covid-19 lockdowns for the slow rollout. The World Bank also noted that “frequent changes within the MMDA leadership (five chairmen in five years) further impacted procurement and disbursements.”

“The sum of these challenges set project implementation back by roughly two years,” the World Bank said in 2024.