Gov’t plans to borrow $1 B this year

MANILA, Philippines - The government is planning to borrow up to $1 billion to service debt requirements this year, according to Monetary Board sources.

Sources said the Department of Finance (DOF) has already conveyed to the Bangko Sentral ng Pilipinas (BSP) its plan to borrow but did not say whether it would tap the domestic or overseas debt market.

When asked to confirm this, Finance secretary Cesar V. Purisima merely said the government would continue its liability management program to take advantage of the low interest rate environment.

The BSP approves all foreign borrowings of both the public and private sectors.

Since it took over in 2010, the Aquino administration has stepped up efforts to reduce the government’s borrowing cost, lengthen the maturities of its outstanding debt, and reduce the bunching up of maturities to help cushion the economy from fluctuating foreign exchange rates.

Purisima said the government would continue to take advantage of market opportunities to lengthen the maturity profile of both domestic and external debt.

The government’s liability management program is aimed at boosting the country’s peso portfolio while at the same time reducing the foreign currency component of its debt.

While borrowing dollars from local banks will help the central bank manage the foreign exchange better, the Aquino administration  still wants to keep the Philippines on the radar of foreign investors.

The Philippines sold $1 billion worth  of 10-year peso-denominated bonds overseas in September 2010 and raised

$1.25 billion from an offer of 25-year similar notes in January 2011.

While the government’s budget deficit has been on a downward trend, the country needs to continue borrowings as expected revenues from tax collections may not be enough to fund total expenditures.

Gross borrowings grew 56.2 percent in the first nine months of 2012 to P601.04 billion. The bulk of the amount or P503.61 billion came from the domestic market while the remaining P97.43 billion came from foreign lenders.

Government officials earlier said this year’s borrowing program would increase the national government debt to P5.78 trillion.