THE PHILIPPINES asked the Asian Development Bank (ADB) to expand its loan portfolio in the next five years to give developing member countries greater access to credit as they recover from the pandemic.
“In order to be responsive to critical needs, the ADB must level up. Specifically, there is a need for the bank to seriously consider a substantial expansion in its loan portfolio in the next five-year period,” Finance Secretary Carlos G. Dominguez III said during the ADB Governors’ seminar at the bank’s 54th annual meeting held virtually on Monday.
“This will effectively support its member countries’ recovery even if this brings forward the need for a capital increase,” Mr. Dominguez said.
ADB President Masatsugu Asakawa responded positively, saying the multilateral bank was able to increase its lending last year to a record high of $32 billion. This was 32% higher than 2019’s $24 billion.
Mr. Dominguez said the bank served as a “prime vehicle for regional cooperation,” especially last year when ADB provided the financing that the Philippine government needed to respond to the crisis promptly.
In the Philippines, the bank’s total lending reached an all-time high of $4.24 billion in 2020, with 56% or $2.39 billion of which financed the government’s pandemic response.
The ADB also set a $3.9-billion lending program for the country this year, which includes the $400-million loan for vaccine procurement.
“The effort to revive our economies will be a long one. Developing countries need access to financial resources to boost healthcare systems and build resiliency against new virus outbreaks. We also need to support the recovery of the sectors that were severely affected by the contagion,” Mr. Dominguez said.
At an earlier session on Monday, Mr. Asakawa said developing economies should gradually reduce their reliance on external financing to support their programs and instead, boost their capacity to generate more revenues through taxation.
He said a robust source of domestic resources could help governments keep their fiscal standing sustainable.
“Every developing country is under enormous pressure on budget and public debt resulting from large-scale countercyclical fiscal expenditures,” Mr. Asakawa said.
“DMCs (developing member countries) should try to rely less and less on external financing, by enhancing its domestic resources to make their financial structure viable and domestic resources, which mainly means tax revenues,” Mr. Asakawa said.
“If you look at a tax to GDP (gross domestic product) ratio in our region, it’s relatively low compared with the world average. In other words it can be interpreted that there is much room to increase our tax revenue by either restructuring our tax policy and/or by enhancing our tax administration efficiency and capability,” he added.
The ADB announced last year that it would set up a regional tax for its developing member economies to improve domestic resource mobilization and international tax cooperation. — Beatrice M. Laforga