Rama Pushes Another Loan to Pay off Php 3-B Yen-denominated SRP Loan

Cebu City Mayor Michael Rama has said he will pursue another loan to pay off the Php3-billion yen-denominated loan of the South Road Properties (SRP).

Rama said the loan is expected to give the city coffers some relief in debt payments.

The city government still has a Php3 billion outstanding balance of the Php5.6-billion it borrowed from the Japan Bank for International Cooperation (Jica) in 1997 for the SRP development.

But the Department of Budget and Mamagement (DBM) declared the city’s 2015 Annual Budget “inoperative in part” because it exceeded the debt cap by Php 2.23 billion.

The city has appropriated Php3.2 billion for debt servicing, which is way beyond the allowable 20-percent of regular income.

Since the city’s revenue totaled Php4.87 billion, it is therefore only allowed to set aside Php974.47 million to pay off debts.

Cebu City Budget Officer Marietta Gumia said the city can still push through with the buyout since the city’s debt cap is still within what is allowed by law.

“We will not use the regular income to pay off the loan. We are still within the allowed debt cap knowing that we paid Php179 million for February and around Php160 million in August,” she said.

The city sets aside Php300 to Php500 million a year for the SRP loan.

Of the amount, Php150 million to Php200 million is for the interest payment and the guarantee fee.

As loan guarantor, the national government gets one percent of the loan balance, which Cebu City is obligated to pay.

At present, the city has an outstanding balance of Php2.9 billion based on the prevailing foreign exchange rate.

Cebu City lawyer Jerone Castillo said it is not a new loan but a conversion to retire an existing loan having a zero net effect.

The Land Bank of the Philippines, Castillo said, advised them to convert foreign currency dominated loan into a peso denominated loan to avoid variances on foreign currency.

The conversion will allow the city government to save Php1.1 billion in guarantee fees.

The city has already paid a total of Php6.8 billion, which is bigger than the original loan, inclusive of the national government’s guarantee or commitment fee amounting to Php546.36 million. (PNA) FPV/EB