One of two lots put up for auction at the South Road Properties. (CDN FILE PHOTO)
CEBU City Hall was able to save around P1.8 million in its latest payment for the amortization of the South Road Properties (SRP) loan.
Last February 20, the Land Bank of the Philippines (LBP) has started collecting a lesser interest rate of 1.5 percent from the city’s outstanding balance for the SRP loan.
Prior to this latest payment, the LBP has been imposing a two percent interest rate on the loan.
According to City Treasurer Tessie Camarillo, the city paid P193 million for the loan amortization last February 20.
City Budget Officer Marietta Gumia explained that the payment already included the interest and other charges for the SRP loan amortization.
“The interest rate of the LBP spread has been reduced effective this year from 2.00% to 1.50%. We were able so save around P1.8 million,” she told reporters.
The reduction of the interest rate was agreed in a meeting in August 2016 between the LBP and city officials led by Mayor Tomas Osmeña, Councilor Margarita Osmeña and members of the city’s Local Finance Committee.
Last month, the Cebu City Council has also approved a resolution by Councilor Sisinio Andales authorizing the mayor to enter and sign an amendment of the city’s subsidiary loan agreement with the LBP for the SRP.
Andales said in his resolution that the reduction will be beneficial for the city of Cebu. It was requested by the mayor earlier.
The city pays its SRP loan amortization to the LBP twice every year – on February 20 and August 20.
The city government availed of a P2.83 billion loan for the SRP project in 1996.
Since then, the city has already paid more than P5 billion. The amount has drastically increased through the years due to differences in foreign exchange rates since the loan was availed in Japanese Yen through the Japan International Cooperation Agency.
According to Gumia, the outstanding balance of the loan is now at around P2 billion.
Since the yearly interests for the amortizations of the SRP loan are based on the diminishing outstanding balance of the loan, Gumia said the P1.8 million savings per amortization is also expected to be lower in the succeeding amortizations to be paid by the city.