By Chino S. Leyco

Beijing-led Asian Infrastructure Investment Bank (AIIB) wants to explore the possibility of local currency financing and a variable spread facility in providing loans to help fund the “Build, Build, Build” program of the Duterte administration.

In a statement, Finance Secretary Carlos G. Dominguez III also said that AIIB is eyeing possible co-financing arrangements with other multilateral institutions in implementing big-ticket infrastructure projects.

Dominguez welcomed the AIIB’s proposals during his meeting with the bank’s top officials led by its president Jin Liqun, who also assured that they will focus on “the actual work” in implementing infrastructure projects to ensure that they get completed on schedule.

The AIIB chief also assured the Philippine officials that the bank’s financing has no any hidden or added costs to Filipinos.

“We are quite sensitive to interest rates. Although they may seem small amounts, we do not want to reverse the trend of lowering our spreads. So it is very encouraging that you are considering variable spreads (over the LIBOR facility),” Dominguez said.

“I was hoping for an update on it. We are happy about the local currency bonds as well,” he added.

LIBOR stands for the London Inter Bank Offered Rate, the benchmark reference rate used for debt instruments.

Jin said the AIIB is highly responsive to the needs of its borrowers, which is why it is willing to study flexible financing schemes in extending loans for infrastructure projects.

“We explore other possibilities and we are looking at the possibility of variable interest rate, we are looking at the possibility of local currency financing,” Jin said.

Dominguez said the Philippines now has a lot of headroom in funding its massive infrastructure program through various financing arrangements, following the passage and implementation of the first package of the comprehensive tax reform program (CTRP).

He also cited the reforms in the budgeting system now being put in place to ensure that public funds are well spent, and the Philippines’ decreasing debt-to-gross domestic product (GDP) ratio of which foreign obligations now account for only 23 percent.

Dominguez said the country’s current debt-to-GDP ratio of 42 percent is expected to decline further to 38 percent by 2022.

The AIIB’s first project with the Philippines, which was approved last year was the $500-million Metro Manila Flood Management Project, which it is co-financing with the World Bank.

This flood control project involves the construction of new pumping stations and modernizing existing ones.