Manila, Philippines (BBN)- The Asian Development Bank (ADB) is extending a $250 million loan to strengthen the policy reform initiatives of the Philippine government for fiscal management, investment climate and social sectors.

The loan is a second of a three-part Development Policy Support Program (DPSP) aimed at helping the Philippines achieve its medium-term development goals, an ADB press statement said on Wednesday.

The first DPSP loan was approved in February 2007.

Since then, the Philippine government has implemented a series of measures to address the fiscal imbalance, resulting in improvement in the fiscal situation and macroeconomic stability.

However, the surge in commodity prices in early 2008, volatility in US financial markets, and the economic slowdown in developed economies have negatively affected the Philippine economy, with a sharper-than-expected slowdown in gross domestic product (GDP) growth and a spike in inflation to a 17-year high level in August, the ABD added.

The external shocks will challenge the government’s resolve to maintain fiscal and macroeconomic stability and performance. At the same time, it is important to protect spending in the social sectors to help poor and vulnerable families, and achieve the country’s longer term development objectives.

The DPSP also includes a set of measures to strengthen the investment climate with focus on reducing red tape, support for infrastructure policy and rural development.

BBN/SI/SS/AD-01October08-5:33 PM (BST)