Gov’t to cut foreign comm’l borrowing to $1B next year

The government will cut its foreign commercial borrowing to only $1 billion in 2007, down from the $3 billion programmed commercial borrowing for this year.

Finance officials said the larger proportion of the government’s borrowing requirement would be financed out of official development assistance (ODA) amounting to $1.46 billion.

National Treasurer Omar Cruz told reporters that total foreign borrowing for 2007 would amount to $2.5 billion including ODA loans, as the government’s borrowing needs also dropped as a result of declining budget deficit.

On the other hand, Cruz said the total domestic borrowing was programmed at P208 billion or $3.9 billion; broken down into P20 billion worth of Treasury bills (T-bills) and P188 billion worth of Treasury bonds (T-bonds).

"This level of borrowing is in keeping with the programmed deficit of P63 billion and still based on the programmed borrowing ratio of 33 percent foreign and 67 percent domestic," Cruz said.

Cruz said the government has firm commitment for about $850 million worth of program loans and $616 million project loans that would come from donor countries and multilateral funding agencies.

This year, the programmed foreign borrowing was pegged at around $4 billion, with $3.1 billion coming from commercial borrowing and about $850 million from ODA loans.

"But the actual foreign borrowing this year was actually less," Cruz said.

Total commercial borrowing amounted to $2.85 billion while actual ODA amounted to $1 billion.

Total domestic borrowing, on the other hand, was programmed to reach P582 billion but the government borrowed 135 percent less than expected with total government securities issuance amounting to only P247 billion.

Out of the total domestic borrowing of P247 billion, the government actually issued only P108.7 billion worth of T-bills and P139.6 billion worth of T-bonds.

In 2007, the Bureau of Treasury planned to issue only a token amount of T-bills, Cruz said.

"T-bills have become rather irrelevant because the market wants longer tenor instruments," he said. "Bonds have also become as liquid as treasury bills so they prefer that."

Cruz said the 2007 borrowing program, however, could still change as the year progressed. "Like this year, we actually borrowed less than we intended to," he said. "Next year could be the same. It could actually be less."