Subic Bay Vote Won't Halt Debt Plan, Philippines Says

NEW YORK - The Philippines government plans to go through with a $5.3 billion debt reduction agreement despite the refusal by the country's Senate to renew a U.S. lease for the Subic Bay naval station.

Philippine officials had said earlier this month that failure to renew the lease could jeopardise financial support for the debt reduction agreement.

Central bank governor Jose Cuisia said the Senate's rejection meant that the Philippines would probably get around $800 million to $900 million in financing to carry out the agreement, rather than the $1 billion to $1.2 billion it had originally hoped for.

"We are pushing through with the debt deal despite nonratification of the treaty agreement," Mr. Cuisia said in a telephone interview from Manila.

The Philippines needs a minimum of $640 million to implement key portions of the agreement.

Mr. Cuisia said that the Senate's rejection meant that $200 million in annual rent the United States pays for Subic Bay would not be available and that the Philippines will have to scale back plans to purchase a portion of its debt at a discount.

But he added that enough financing is being lined up from other sources, including $300 million from Japan and $300 million from the World Bank, for the rest of the agreement to go through.

Agreement with 300 Banks

U.S. and Japanese banks hold the bulk of the $5.3 billion in loans covered by the agreement.

The pact, reached late last month with more than 300 foreign banks permits them to exchange their loans to the Philippines at a discout on principal or interest for Philippine government bonds, provide new financing, or sell their loans back to the country at a discount.

Senior bankers in New York said they expect the agreement to move ahead despite the controversy over Subic Bay.

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