Reality of Aid Network – Asia Pacific

21 November 2013

Media Release

A few weeks after super typhoon Yolanda (Haiyan) wreaked havoc in the Visayas in central Philippines, afflicting some 10 million people across 36 provinces and is feared to have claimed more than 10,000 lives, multilateral development institutions such as the Asian Development Bank (ADB) and the World Bank extended financial assistance mostly in the form of loans for relief operations in areas hit by the super typhoon.

The ADB and the World Bank have offered around US$1 billion in total loans to finance the massive rehabilitation and reconstruction requirement following the devastation in affected areas. The Philippine government said it wanted to take advantage of the available cheap financing, which comes mostly in the form of soft loans. It claims that the two creditors offered very low interest rates, which is well below one percent, and maturities of between 20 and 30 years.[i] The government said it might consider borrowing more from multilateral institutions and less from the international capital market to take advantage of the available cheap financing that has become even more accessible following the calamity.

The Philippines is already the fifth largest borrower of loans extended by the ADB, accounting for 10 percent of disbursed loans or roughly $5.2 billion as of end-2012.[ii] Debts to the ADB alone already amount to more than 10% of the total national government foreign debt. This means that Filipinos, including the very victims of typhoon Yolanda, will have to shoulder the burden of paying for the new calamity loan, which will be added to the country’s external debt.[iii]  The Philippines’ foreign debt already stood at $60.3 billion at the end of 2012[iv]. More than 30% of the country’s GDP already goes to debt-servicing, which could have easily been allocated to the provision of much-needed public services by its citizens.

ADB’s loan scheme is a double blow to developing countries like the Philippines, which contributed least to the climate crisis but are the most aggravated when it comes to its impacts. Under the United Nations Framework Convention on Climate Change (UNFCCC), developed countries are under obligation to “assist the developing country Parties that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects.”[v] This means that it is mandatory for developed countries to finance the costs of climate change response in developing countries in keeping with their historical responsibility and the principle of common but differentiated responsibilities (CBDR). The climate convention recognized developed countries’ responsibility for emitting the vast majority of planet-warming greenhouse gases that led to the climate crises the rest of the people in the developing world are suffering.

Developing countries have long lobbied and pushed for more ambitious commitments and targets in climate negotiations but is continuously being stalled and watered-down as rich countries increasingly backtrack on their commitments. Yeb Saño of the Philippine delegation recently made a fervent appeal to “stop the madness” and do what is necessary to prevent a future where disasters like this are a way of life.

Disasters are never natural and are a result of inequity and the poorest people of the world are at greatest risk because of their vulnerability and decades of maldevelopment. Taking advantage of the climate tragedy to make more profit through loan interests and using it to push the country already mired in debt further down the drain is madness. To say that it is adding insult to injury is an understatement.

It is no secret that ADB and World Bank projects in the country have mostly led to accelerated privatization of government services and utilities which made services unaffordable and inaccessible to poor and marginalized communities. The market-driven neoliberal policy prescriptions have perpetuated unsustainable consumption and production practices that aggravated the climate problem. It is also no secret that by giving the World Bank large sums for climate action in developing countries, developed countries are able to define and lock the climate agenda in their favor.

The World Bank and ADB should therefore not wash hands if the impacts of climate change worsen, at the expense of the poor and vulnerable people in developing countries like the Philippines who are on the front lines, not when these Banks’ policy prescriptions and practices relentlessly perpetuate the fundamental unequal relations which lie at the root of the climate problem.



[i] ADB, World Bank offer $1b in loans to PH,

[ii] PHL is 5th biggest ADB borrower,

[iii] Philippine external debt is the amount of money owed by the Filipinos to foreign creditors such as the Asian Development Bank (ADB) and the World Bank. This includes the principal amount borrowed from banks and institutions and the interest that had accumulated over the years.

[iv] Phl trims foreign debt to $60.3B,

[v] UNFCCC, Article 4.4

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