THE Cebu City Government has moved the target date for the full payment of the P960 million outstanding balance of the loan used for the construction of the South Road Properties (SRP) from August 19 to August 29, 2022.
Lawyer Jerome Castillo, special assistant of the office of the mayor, told SunStar Cebu Tuesday, August 9, that they had completed securing the documents that would make their payment legal but were still waiting for the certificate of full compliance, which will be issued by the Bureau of Local Government Finance.
Castillo believes the certificate will be issued before the new target date.
Castillo said earlier that the P960 million is the only remaining loan of the City, and settling this obligation would leave the City debt-free.
In 1995, the Cebu City Government received a 12.315 billion yen loan, equivalent to P4.65 billion at the time, from the Japan International Cooperation Agency (Jica)through Land Bank of the Philippines (Landbank) to construct the SRP, a 300-hectare reclamation project. The loan is payable in 30 years, or until 2025.
But Castillo said paying the outstanding balance ahead of its due date would allow the City to save money on interest payments.
The loan was P4.65 billion when the exchange rate was P24.19 to a US dollar in 1995. But with the dollar now at P55.54, the loan has now more than doubled since it is based on the value of the dollar and not the Japanese yen.
“This is high time. This is in accordance with good fiscal management that we pay for it now so we will spare the City from further economic shock,” Castillo said.
He added that the City could have saved nearly P1 billion in interest payments if the P2.4 billion balance in 2015 had been paid as Rama had wanted. The US dollar was only P44.80 then.
In addition to the foreign loan’s valuation being vulnerable to foreign exchange fluctuations, the City pays Landbank, the conduit bank of Jica, a one percent guarantee fee of the City’s outstanding loan balance for the year for remittance to the Department of Finance, the guarantor of the loan.
During his term as mayor in 2015, Rama had started work on the prepayment of the loan. From 2016 to 2019, however, Tomas Osmeña’s administration stopped working on it, Castillo said.
“Let us avoid further economic effect, especially that we cannot also dictate the terms of the world economy,” Castillo said.
From 1995 to February 2022, Cebu City paid P8.29 billion, of which P4.8 billion was for the principal, P3.1 billion for the interest, P35.9 million for documentary stamps, and P279.1 million for guarantee fees. (LMY, CTL)