World Bank readies $23 billion lending program for the Philippines

The World Bank Group (WBG) will extend to the Philippines between $22 billion and $23 billion in loan and other financing starting mid-2025 until 2031 to support both public and private initiatives aligned with the country's climb to upper-middle-income country (UMIC) status, according to a report by Manila Bulletin.

According to the country partnership framework (CPF) for the Philippines covering the period July 2025 to June 2031—coinciding with the Washington-based multilateral lender's fiscal years 2026 to 2031—the new six-year lending program would allow the WBG "to provide continued support for the government's implementation of the current PDP," referring to the Philippine Development Plan 2023-2028, which serves as the socioeconomic blueprint of the Marcos Jr. administration.

In particular, during FYs 2026 to 2031, the International Bank for Reconstruction and Development (IBRD), which is the WBG's lending arm for developing countries like the Philippines, will lend about $18 billion, or $3 billion per year, according to the document seen by Manila Bulletin.

The WBG noted that its IBRD portfolio in the Philippines has ballooned from only $377.6 million in new annual commitments during FY 2018 to $2.85 billion in the current FY 2025, ending next month. The average financing size per lending operation, or the usual amount of a loan, likewise more than doubled—from $189 million to as much as $458 million this year.

Under IBRD financing, "successful investment projects will be scaled up through additional financing or follow-on operations."

"New instruments—such as program-for-results (PforR) and multiphase programmatic approach (MPA) programs—will be introduced to expand the range of tools available to better support the Philippines," the document read.

"Trust funds will continue to play a catalytic role, with an expected recipient-executed grant volume of $150-200 million, alongside $20-30 million of bank-executed trust funds," it added.

The rest of the indicative WBG financing for the next six years will be through its private-sector lending arm, the International Finance Corp. (IFC), with an estimated $4-5 billion in long-term commitments and mobilization.

With a cumulative $1.9 billion in commitments from 2018 to 2025, "going forward, the IFC will continue building its program around eight priority areas with climate and digitalization as cross-cutting themes," the WBG said.

"The IFC aims to ramp up its new commitments from around $400-600 million per year in earlier years of the CPF to around $1 billion in [the] second half," the document added.

The IFC also plans to convert about $29.6 million worth in its advisory portfolio in the Philippines into potential investments, specifically in the areas of affordable and resilient housing, capital market development, climate finance, digitalization, financial inclusion, green and resilient buildings and cities, private-sector investment promotion and reforms, as well as public-private partnerships (PPPs).

As the WBG mentioned in its May 22 statement following the endorsement of this new CPF by its board of executive directors, the Multilateral Investment Guarantee Agency (MIGA), which extends political risk insurance to both private-sector investors and lenders, is "exploring opportunities to support domestic and cross-border investment through its different products, including LCMF [local currency mobilization facility], trade finance and non-honoring guarantees."

"The deployment of guarantees, however, will depend on investor demand and pace of project development," it added, citing that MIGA "currently has no active guarantees in the Philippines due to perceived low political risk, but it remains engaged with potential investors to mobilize foreign capital."

MIGA is looking into collaborating with the WBG and the IFC in Philippine renewable energy (RE), wherein "there is considerable foreign investor interest," as well as microgrid projects in remote areas, data center development, and transport infrastructure to be rolled out through PPPs.

According to the WBG, the 2026-2031 CPF's alignment with PDP 2023-2028 means that its financing for the Philippines will focus on the following three outcome areas and indicators: improved access to quality health and education; more private-sector jobs; and stronger socioeconomic resilience, to be cross-cut by its aim of making the government more efficient.

In particular, the new CPF targets 19 million Filipinos receiving quality health, nutrition, and population services; 15 million students supported with better education; four million new or better jobs; 19 million people using broadband internet; $2 billion in total private capital enabled or mobilized; 12.5 million beneficiaries of social safety net programs; 13 million people with enhanced resilience to climate risks; as well as 20 million Filipinos using digitally enabled services under an efficient public sector, the document said.

"The CPF aligns with the country’s goal of achieving UMIC status and its long-term vision, AmBisyon Natin 2040, which envisions a prosperous and inclusive society," the WBG said.

It cited that "the Philippines is on the verge of achieving UMIC status, following 15 years of strong, job-rich, and pro-poor growth."

However, despite robust economic growth in recent years, "socio-economic indicators surpass LMIC [lower-middle-income country] averages but fall short of UMIC standards," the WBG lamented, noting that the Philippines' gross national income (GNI) per capita stood at only half of UMICs' average.

Also, "education and health indicators also lag behind UMIC levels," such that "low educational outcomes and nutritional deficiencies hinder human capital, exacerbated by the [Covid-19] pandemic," it said.

"As it transitions to UMIC status, the country faces challenges in sustaining growth, reducing poverty, and expanding its middle class. While the economic outlook remains positive, potential GDP [gross domestic product] growth is projected to slow by one percentage point over the next two decades due to current trends in capital accumulation and productivity growth," the WBG said.

Once the Philippines achieves UMIC status, it will eventually lose access to the relatively lower interest rates attached to official development assistance (ODA), or cheap loans extended by multilateral lenders like the World Bank, the Manila-based Asian Development Bank (ADB), and the China-led Asian Infrastructure Investment Bank (AIIB), as well as its bilateral development partners such as Japan and South Korea, among others.