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Days before Duterte’s departure, the Philippines receives a P17.4 billion Chinese loan as a bridge loan.

MANILA, Philippines — According to the Department of Finance (DOF), the Philippines has borrowed P17.4 billion from China to build a bridge connecting President Rodrigo Duterte’s birthplace of Davao City with Samal Island (June 14).

Finance Secretary Carlos Dominguez III on behalf of the Philippines and Chinese Ambassador to the Philippines Huang Xilian on behalf of China exchanged loan documents on the 2.3 billion renminbi financing—the outgoing Duterte administration’s first ODA denominated in the Chinese currency. Previously, China’s ODA loans to the Philippines were denominated in US dollars.

According to the Department of Finance, China’s newest loan to the Philippines has a 2% annual interest rate and is due in 20 years plus a seven-year grace period.

This Chinese funding for the four-lane Samal Island-Davao City link will cover 90 percent of the project’s P19.3 billion design-and-build contract.

The 3.9-kilometer bridge was previously awarded to China Road and Bridge Corp. by the Department of Public Works and Highways (DPWH). This bridge, according to the Department of Finance, “would dramatically reduce travel time between Davao City and Samal Island, and reduce reliance on ferry services.”

“The Samal Island-Davao City connector project complements the Mindanao spatial strategy/development framework 2015-2045, the Davao regional development plan, and the Davao Gulf area development plan 2011-2030, which all aim to facilitate commerce and trade, create jobs, and share the benefits of Mindanao’s growth to more remote municipalities, including Samal Island,” according to the DOF.

The Brunei Darussalam-Indonesia-Malaysia-Philippines East Asean Growth Area Cooperation (BIMP-EAGA), which aims to promote economic development in underdeveloped and geographically remote regions of its member countries, is also expected to benefit from the Samal Island-Davao City bridge, according to the DOF.

To date, the Duterte administration has borrowed $1.1 billion from China. Other Chinese loans obtained by the Duterte administration included those for the Chico River pump irrigation project by the National Irrigation Administration (NIA), the New Centennial Water Source-Kaliwa Dam by the Metropolitan Waterworks and Sewerage System (MWSS), and the Department of Transportation’s (DOTr) Philippine National Railways (PNR) south long-haul project by the Department of Transportation.

China was also anticipated to provide funding for the Mindanao railway, which had been delayed.

Meanwhile, the Bureau of the Treasury (BTr) generated only P19.6 billion on Tuesday through reissued seven-year notes, falling short of the P35 billion it needed due to higher returns sought by domestic creditors.

The BTr set the annual rate for the bonds, which will mature in six years and 11 months, at 6.74 percent, up from 6.494 percent on the secondary market. Seven-year IOUs were likewise priced at 6.4 percent less than comparable seven-year IOUs.

Bid rates ranged from 6.8% to 6.4 percent, with a high of 6.8% and a low of 6.4 percent.

Debt markets “remain defensive,” according to National Treasurer Rosalia de Leon, “with a deluge of news both from the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) taking action to combat a jump in prices.” The Fed is anticipated to raise interest rates by as much as 75 basis points (bps) this week, while BSP officials have signaled that the Monetary Board may raise rates for the second time next week.

De Leon stated that the BTr’s yield cap, which awarded treasury bonds maturing in May 2029 in part, was in line with market rates.

The BTr has borrowed P39.7 billion from this bond series so far.

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