Philippines Emergency COVID-19 Response Development Policy Loan

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The emergency development policy loan (DPL) will support the Government of Philippines’ efforts to protect the poor and the most vulnerable households and firms from the immediate impacts of the coronavirus disease 2019 (COVID-19) outbreak. The operation, in the amount of US500 million dollars, is a stand-alone operation aimed at supporting critical policy and institutional measures taken by the Government with the support of the Bank. The development objective is to (i) mitigate the impact of COVID19 on the poor and vulnerable households and (ii) provide financial relief to affected SMEs. The proposed operation is consistent with the overall engagement of the World Bank in the Philippines, as laid out in the Country Partnership Framework approved by the Board of Directors on December 2019, and complements the recently approved COVID-19 Emergency Response Project in the health sector.1 Protecting households and firms from the immediate impacts of the outbreak is critical for a sustainable recovery. In addition to supporting sound public policies, the proposed operation will provide timely financial support which will help the Government meet its large unforeseen financing gap. The Government’s unforeseen additional financing need is estimated at US8.3 billion dollars but is expected to rise with the duration of the outbreak. Just as more government funding is needed to address the COVID-19 shock, market financing has suddenly become difficult to access. Borrowing costs have increased significantly in financial markets in the Philippines and in the region as foreign investors returned their capital to what are perceived as safer havens, and as willing buyers of government bonds have become much fewer in the market. The Government is therefore turning to multilateral and bilateral institutions to fill much of its funding gap. Together with the Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB), which are providing additional budget support of US1.5 billion dollars and US750 million dollars, respectively, to be disbursed in 2020, this emergency DPL operation will help the Government meet part of its unexpected financing needs. The Government is also discussing with other bilateral partners, though no commitment has been announced so far.