Adoption of Coordinated Government Response to Credit Requirements of Farmers Affected by Drought

May 21, 1983

LETTER OF INSTRUCTIONS NO. 1327

DIRECTING THE ADOPTION OF A COORDINATED GOVERNMENT RESPONSE TO THE CREDIT REQUIREMENTS OF FARMERS AFFECTED BY DROUGHT

WHEREAS, the recent drought in Mindanao and the Visayas has affected the ability of farmers to repay their existing crop loans; aisa dc

WHEREAS, it is necessary for government to adopt a coordinated effort to ease farm credit in order to allow the replanting of crops and replenish of livestock;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by law, do hereby Order and Instruct that credit be eased for farmers affected by the recent drought:

Restructuring of Obligations

1. Farmers in drought areas shall be given more time in which to pay their special financing program obligations to banks and the Central Bank shall in turn give up additional time within which banks may settle their obligations to the Central Bank.

2. The Central Bank shall allow rural banks to restructure for a period of one year, their corresponding rediscounting liabilities under short term supervised credit programs which are secured by the restructured notes of their borrowers: Provided, That in meritorious cases, a second or third restructuring may be allowed for a maximum period of three (3) years: Provided, Further, That in other cases, farmer-borrowers' delinquent accounts may also be restructured under the same conditions if at least thirty (30) percent of the principal and accrued interest due is paid on each of the first and second restructuring.

3. Rural banks shall continue to have access to rediscounting during the life of the restructured loans.

4. CB: IBRD borrowers may restructure their accounts in accordance with existing Central Bank guidelines issued under its Circular-Letter No. 79-61 dated October 19, 1979.

Special Time Deposits for Replanting

5. The Central Bank and the Ministry of Agriculture shall release immediately from the Special Agricultural Rehabilitation Fund, for purposes of allowing additional Special Time Deposits to rural banks in order to finance the replanting/replenishing requirements of farmer-borrowers adversely affected by the drought.

Money Supply and Credit Expansion

6. It shall be understood that these measures to ease credit to farmers in drought areas shall be implemented within the approved targets for the expansion of money supply and credit, to ensure that there are no adverse effects on price levels and the Balance of Payments. Accordingly, the Central Bank shall adjust as necessary, the share of other sectors in the credit ceilings as these sectors' contribution to the plight of the drought-stricken areas and farmers.

Crop Insurance

7. The Philippine Crop Insurance Corporation shall immediately settle insurance claims on rice and corn loans covered by crop insurance and shall give priority to the payment of guarantee claims on loans covering cotton, tobacco, vegetables and all other crops/livestock financed under the supervised credit program.

8. Supervised credit projects not covered by crop insurance shall be subject to guarantee coverage under existing Central Bank guidelines under its Circular-Letter to all Rural Banks No. 81-47 dated April 28, 1981. cd

9. The Philippine Crop Insurance Corporation shall study the possibility of broadening its crop insurance program to include sugar, coconut, cotton, tobacco, and other crops covered by supervised credit programs.

DONE in the City of Manila, this twenty-first day of May, Nineteen Hundred and Eighty-Three.