CEBU CITY, Aug. 23 (PNA) — The Land Bank of the Philippines (LBP) has offered the Cebu City Government an interest rate of 4.5 percent for a new loan the city plans to secure to pay in full the P2.9 billion remaining balance of the loan for the South Road Properties (SRP).
The interest rate is much lower than the 11 percent interest rate the city government is paying on the loan from the Japan bank for International Cooperation (JBIC).
If the city continues paying its yen-denominated loan until 2025, it is projected to suffer a foreign exchange loss of approximately P992.63 million.
Cebu City Accountant Mark Solomon told the City Council in an executive session that the city has been suffering from interest rate fluctuations at an average of P90.24 million per year from 2005 up to the present.
“The substantial amount, which was charged to the general fund, could have been used as budget for basic services of the city,” he said.
The city’s loan balance with the JBIC stands at around P2.92 billion.
In 1996, the city took a 12.315 billion yen loan, roughly P4.65 billion during the date of transaction, from JBIC to develop the 300-hectare SRP.
The city has so far paid P2.66 billion for the principal amount.
“There’s a need to convert the loan to get rid of the one percent guarantee fee and to fix the actual interest rate to its nominal rate. Unless we provide remedy today, the coffers of the city will continue to bleed, which will eventually affect the city’s capacity to deliver basic services,” Solomon said. (PNA)