Editorial: SRP loan ‘conversion’-A A +A
Monday, August 25, 2014
SELLING of a big chunk of the South Road Properties (SRP) with part of the money earned used to pay in full the loan incurred for the reclamation work is but one of the steps that the Rama administration wants to take to untie the financial knot that the project created. Converting the foreign loan into a domestic one is another.
The plan to sell SRP lots is moving forward with the weakening of the Bando Osmeña-Pundok Kauswagan (BOPK) hold over the Cebu City Council after four councilors aligned with it bolted from the party. With the four councilors supporting Team Rama on the issue, Mayor Michael Rama is assured of a slim majority in the city council to realize the sale.
Even former mayor Tomas Osmeña, the party chief, seems resigned to the inevitability of the sale with his recent pronouncements, although he can still work to block it by
some other means, like through the courts.
But the plan to convert the yen-denominated loan to a domestic one seems difficult to surmount even with the support of the city council because the former mayor, who, as expected, is also opposing the plan may have other aces up his sleeve. Part of the process works in his favor.
The plan is actually a wise one because in paying the loan the city has lost millions of pesos to foreign currency fluctuations. Officials of the City Accounting Office have noted that since the city started paying the P4.65-billion loan in 2005, it already suffered foreign exchange losses amounting to P902,388,126, or around P90 million per year.
The foreign exchange losses in the next ten years are projected at around P1 billion, which does not include the one percent guarantee fee for the outstanding loan balance for a year that the city remits to the Department of Finance. That will reach around P200 million in ten years.
But there are several requirements that the City must comply with to convert the foreign loan into a domestic one, including its getting a seal of good housekeeping from the Department of Interior and Local Government (DILG). The city last got the seal in 2011 yet.
The main issue against the Rama administration by the Osmeñas—the former mayor and his wife Margot, chairperson of the city council’s committee on budget and finance—has been that the city has mismanaged its finances. If that is true, then the mayor needs to first set the ship aright.
But even if he does that, the DILG is headed by a politician, Mar Roxas, who views the Osmeñas as a political ally. How that will factor in the release to the city of a good housekeeping seal remains to be seen.
Published in the Sun.Star Cebu newspaper on August 26, 2014.