THE Land Bank of the Philippines agreed to reduce the interest of the Cebu City government’s loan payments of the South Road Properties.
LBP granted the request of the city government to reduce the interest from 2 percent to 1.5 percent.
The agreement to lower the interest rate was agreed upon during a meeting yesterday with Cebu City Mayor Tomas Osmena and the city’s Local Finance Committee.
Councilor Margot Osmeña, who is a member of the LFC, said that in 1995, market interest rates were hovering around 20 percent but the city was able to get it at 2.7 percent to Japan Bank for International Cooperation (JBIC), 2 percent for LBP for the loan and 1 percent guarantee fund.
“Since 2013, the 1 percent was absorbed by LBP. So down na. It went down to 4.7,” she said.
The councilor said that Cebu City asked LBP to reduce its interest and LBP is willing to give up half percent.
She added that during the meeting it was pointed out that when the loan was granted, the city government at that time did not mind that it was paying the national government because the city owned the properties.
In a transaction like that, the national government would own at least 20 percent of the project, but the national government does not own the property, she said.
“It is absolutely totally owned by the city government,” Margot said.
The 1.5 percent will become effective starting next year since the city already paid its amortization interest of P166.4 million for this year last August 20.
During the meeting, the local finance committee also asked LBP of the pros and cons of prepaying the SRP loan.
Councilor James Anthony Cuenco, who is also a member of the LFC, said that since it was pushed by the City Council to pay the SRP in full, LBP was asked to give the city government comparative figures on paying it in full or in staggered basis.
Councilor Osmeña, however, said that since there is no demand for prepayment, then the city should stick with paying the amortization.
“It always sounds good that wala nay utang. But you will see the practical side also if you can use that money for something else,” she said.
The members of the LFC Board aside from Councilors Osmeña and Cuenco are Councilor Hanz Abella, Cebu City Budget Officer Marietta Gumia and Cebu City Treasurer Tessie Camarillo.