City to Borrow P3B to Pay Off Foreign Loan for SRP

● City government wants to borrow P3 billion from local banks to pay its existing loan from JBIC.

To save government funds, the Cebu City Government is planning to avail another loan in the amount of P3 billion from the local banks with much lower interest in order to pay its existing loan from Japan Bank for International Cooperation (JBIC).

City Administrator Lucelle Mercado explained that JBIC imposes 11 percent interest per annum to its pending loan and in order to avoid this annual interest, the city moves to pay off this foreign loan by borrowing P3 billion from local banks.

Mercado said they are considering a loan from banks that offers lower interest, adding that there are some local banks that offered four percent interest per annum.

Mercado said the Development Bank of the Philippines (DBP) and Philippine National Bank (PNB) offered four percent interest per annum, while Land Bank of the Philippines offered 4.5 percent interest rate.

Mayor Michael Rama and Mercado had already talked to the officials of the PNB in Manila last Monday where they discussed the the loan package that the bank offered.

According to Mercado, the city is eyeing for a loan package with much lower interest rates. She said she hopes to get an offer of three percent per annum. Mercado added they are waiting for other banks to make an offer.

In 1994, the city had availed a 12.315 Billion Yen (P5.3billion) loan package from Overseas Economic Cooperation Fund now JBIC to finance the South Reclamation Project now known as the South Road Properties (SRP).

The whole amount of the loan is equivalent to over P5.3 Billion based on the current exchange rate. The loan is payable in staggered basis until 2025 with the corresponding interest. The next amortization of the city’s loan to JBIC is due this August.

Sources said the interest payments until 2025 would cost the city about P1.15 billion.

Councilor Margarita Osmeña, head of the City Council’s committee on budget and finance, said she has no objections to the plan to lend funds to pay off the JBIC loan.

“I don’t see any problem to terminating the old loan for a new loan, as long as it will improve the financial standing of the City,” Osmeña said.