$400-M ADB loan to help boost farm incomes

August 13, 2020

The Asian Development Bank has approved a $400-million policy-based loan to support reforms of the government aimed at raising the productivity and competitiveness of the country’s agriculture sector and significantly reducing poverty in rural areas.

The Competitive and Inclusive Agriculture Development Program, Sub-program 1 would help the government expand economic opportunities in the farm sector by implementing trade policy and regulatory reforms, enhancing public services and finance to the sector, and expanding social protection to rural families.

“The Philippines has made tremendous strides in reducing the national poverty rate, but rural poverty remains high because of low productivity and limited crop diversification,” ADB vice president Ahmed Saeed said. 

Saeed said this loan would support the government’s comprehensive suite of policy and regulatory reforms, resolving institutional weaknesses in land and water management, expanding agricultural financing to boost productivity, and extending the social safety net to unserved and underserved rural families.

The agriculture industry employs a quarter of the country’s labor force. But the sector lags behind counterparts in other Southeast Asian countries in productivity growth and competitiveness. 

Poverty rates in rural areas remains high, as do child malnutrition and stunting. 

The government has identified agriculture as a priority area for reform under its coronavirus disease 2019 pandemic economic recovery program, as it seeks to ensure food security and reduce poverty in the country.

Among the government reforms under the Competitive and Inclusive Agriculture Development Program, Subprogram 1, is the passage of the 2019 Rice Tariffication Act and the various measures it provides. 

The new law removed quantitative restrictions on rice imports and replaced them with a pure tariff system. 

Using collected duties on imported rice, the government set up the Rice Competitiveness Enhancement Fund to strengthen the rice industry in line with the Philippine Rice Industry Roadmap. 

The government is also initiating additional reforms in land and water resources, including irrigation investments.

Other reforms supported by the loan include additional assistance to farmers making the transition towards higher value crops and those affected by the Covid-19 pandemic. 

These include unconditional cash grants and the Expanded Survival and Recovery Assistance Program for Rice Farmers to provide zero-interest loans to more than 160,000 small farmers. 

The program also expands the government’s pre-school feeding programs to families to reduce malnutrition and stunting.

The new loan would be complemented by upcoming investments to enhance flood risk management in major river basins, improve irrigation efficiency, and promote agro-enterprise development.

Meanwhile, financing to be extended by the ADB to the Philippines is expected to rise to record-high $4.21 billion this year.

Oscar Badiola, ADB Philippines senior programs officer, earlier said from an average of D800 million annually from 2011-2017, total lending to Manila is expected to hit $4.2 billion this year and an average of about $3 billion in the next two years.

Badiola said the additional lending includes those for coronavirus disease response.

About 70 percent of the total financing is for projects under the priority Build, Build, Build program, especially for the Visayas and Mindanao, he said.

ADB data indicate that project financing that have been approved to date include the $1.5-billion Covid-19 active response and expenditure support program, $200-million social protection support project second additional financing, the $400-million support to capital market generated infrastructure financing sub-program 1, the $500-million expanded social assistance program, the $126-million Angat Water Transmission Improvement Project additional financing, and the $26.5-million local governance reform projects.

Programs that are in the pipeline for financing this year are the $400-million competitive and inclusive agriculture development program, subprograms 1; the $300-million inclusive finance development program, subprogram 2; the $125-million health systems enhancement to address and limit Covid-19.