COMMITMENT fees paid by the government for Official Development Assistance (ODA) loans increased 45.49 percent last year, according to the National Economic and Development Authority (Neda).
In its ODA Portfolio Review 2020, Neda said the country’s commitment fees reached $6.78 million due to the cost of financing and implementation delays.
Commitment fees are a portion of the loan amount that is paid by governments for undisbursed portions of their ODA loans from various multilateral and bilateral partners. This means whether or not projects are delayed, governments must pay the fees.
“The rate is applied on the undisbursed amount of the entire loan or a portion thereof [base], which approximates or may be bigger than the amount scheduled to be disbursed due to availment backlogs,” the report stated.
“Thus, even when there is no implementation delay, a certain amount of CF would still be charged as a purely cost of financing. Implementation delay only increases the amount,” it added.
Based on the report, six infrastructure projects logged the largest commitment fees worth $3.13 million, due to implementation delays.
These included four projects funded by the Asian Development Bank (ADB) and one funded by the Japan International Cooperation Agency (Jica) and Asian Infrastructure Investment Bank (AIIB).
The ADB-funded Malolos-Clark Railway Project posted the largest commitment fee of $1.93 million in 2020. The project is being implemented by the Department of Transportation. It is also one of five projects that incurred the highest commitment fees from loan effectivity as of 2020. The government has paid a total of $2.07 million in commitment fees since the loan’s effectivity in September 2019.
Other ADB-funded projects on the list of projects with the highest commitment fees due to delays are: the Improving Growth Corridors in Mindanao Road Sector Project with $0.32 million; Infrastructure Preparation and Innovation Facility-Additional Financing, $0.21 million; and Infrastructure Preparation and Innovation Facility, $0.11 million.
The project financed by Jica was the Capacity Enhancement of Mass Transit Systems in Metro Manila with a commitment fee of $0.3 million; the AIIB project was the Metro Manila Flood Management Project, $0.26 million.
“The top 6 projects with the highest incurred CFs [Commitment Fees] in 2020 attributed to implementation delays also accounted for 85 percent of CFs paid due to implementation delays in 2020,” the report stated.
As of the end of 2020, the commitment fees paid by the top 5 projects incurred the highest costs since their loan effectivity reached $14.99 million.
Cumulative commitment fees paid by the government for all active loans from the loan effectivity of projects reached $28.8 million by the end of 2020.
The French-funded Philippine Ports and Coast Guard Capability Development Project, implemented by DOTr, had the highest commitment fee at $5.39 million.
Jica-funded projects Capacity Enhancement of Mass Transit Systems in Metro Manila and Road Upgrading and Preservation Project logged commitment fees worth $2.62 million and $2.46 million, respectively.
A projected funded by the World Bank and AIIB, the Metro Manila Flood Management Project, also incurred commitment fees worth $2.45 million.