Phl borrowings down 33% in January-October

MANILA, Philippines - Borrowings by the government declined 33.48 percent in the first 10 months of the year because of overflowing liquidity in the financial system.

Documents from the Department of Finance showed that the government borrowed P532.025 billion from January to October, down from P799.81 billion in the same period last year.

The government borrows funds from both local and foreign sources to plug the deficit in its budget, pay maturing obligations, and help fund state projects and programs.

Of the total borrowings, P501.93 billion was sourced locally through the sale of treasury bills and bonds. The domestic borrowings reflected a drop of 28.3 percent from the P700.39 billion recorded a year ago.

Foreign borrowings, which comprise mostly concessional loans from development lending institutions, amounted to P30.095 billion or 69.7 percent lower than the P99.42 billion registered a year earlier. The sharp decline was due to the Aquino administration’s effort to lessen its dependence on foreign borrowings as well as declining interest rates on government securities.

The government wants to rely more on local sources of credit to take advantage of the strong liquidity in the country’s banking system and nearly record interest rates.

The Aquino administration shied away from the international debt market to temper the appreciation of the peso, which is hovering above the P43 per dollar level.

In October alone, government borrowings reached P54.092 billion, down from  P198.77 billion a year earlier.

The government has yet to firm up its borrowing plan for 2014 but preliminary estimates show that 13 percent of total obligations will come from firing sources. For next year, the country is looking to borrow about $2.2 billion from foreign creditors, $1 billion of which will be raised via the sale of sovereign bonds in the international market.  The rest would come from ODA (official development assistance) loans, which have very low interest rates and offer long-term maturities of between 20 and 30 years.

The World Bank and Asian Development Bank have each offered $500 million worth of loans to the Philippines to aid the rehabilitation of the storm ravaged Eastern Visayas.