The Cebu City South Road Properties | CDN file photo
CEBU CITY, Philippines — Cebu City will finally be free from over a 25-year debt should the P4.4 billion supplemental budget that Mayor Edgardo Labella is asking will be passed by the City Council.
Councilor Raymond Alvin Garcia, the chairperson for the council’s committee on budget and finance, told CDN Digital that the P1.2 billion allocation the executive department has proposed with the supplemental budget will be used to pay off the remaining debt of the city.
The city took a P4.65 billion loan in 1995 from the Japan International Cooperation Agency (Jica) for the development of the South Road Properties (SRP).
READ: Cebu City determined to pay off SRP loan before 2022
It took at least 20 years before the city was able to pay half the loan and when Mayor Edgardo Labella took over as the city’s chief executive in July 2019, he promised to pay off the remaining balance.
At that time, the balance was around P1.7 billion, which is technically 22.5 percent of the city’s total income from taxes in 2019, and at least 11.2 percent of the total 2015 sale of the SRP lots at P16 billion.
The mayor said the city will find ways to finish paying the debt within his administration whether through gradual payment or in bulk because the city can afford to do so.
This time, Labella has decided to pay off the loan entirely so that the city government will no longer pay for the 1.5 percent interest of the loan.
In a phone interview with Councilor Garcia, he said this will be the best option for the city because the city will no longer have any liabilities.
“Debt free na ang Cebu City. We are going to free up money for other projects,” he told CDN Digital.
He said the city has been paying off the interest of the loan including the foreign exchange equivalence for the past 25 years.
In fact, in 2019, the city has already paid over P6 billion for the loan, with the interest incurring at least 30.4 percent more of the actual loan.
By paying off the entire amount this year, the city will no longer be paying another 1.5 percent interest allowing the corresponding amount saved to be used for social services.
Yet as Cebu City is about to pay off the remaining balance of the SRP loan, Cebu City’s income from the 2015 sale of a 45-hectare lot in the SRP is also about to be used up.
The supplemental budget will be sourced from a mix of savings from previous budgets and the SRP proceeds.
In 2020, the P16 billion proceeds went down to P5 billion. This time, the executive department has sourced at least P3 billion from the SRP proceeds for the supplemental budget, and this will bring down the standing funds at P2 billion.
Garcia said “it is worth it” to use the SRP proceeds to pay up the SRP loans even if it means that the city’s coffers will be lighter.
After all, the economic boom the SRP will bring to the city in the coming years once all the developments are completed is expected to help SRP pay for itself.
As for the city government, Garcia said it has no plans to take up another loan since there are still “enough funds” for the city’s expenses. /rcg