Government sets lower P150 billion domestic borrowings

MANILA, Philippines — The government has lowered anew its borrowing program next month as it aims to raise only P150 billion via the issuance of Treasury bills (T-bills) and Treasury bonds (T-bonds) in the local debt market.

The amount is 16.7 percent lower than the programmed P180 billion borrowing for September. Last month’s programmed domestic borrowing was also 20 percent lower than the P225 billion set in August.

However, the Treasury only raised P121.1 billion or 67.3 percent of the intended amount this month. It raised P60 billion via T-bills and only P61.1 billion from T-bond auctions instead of the programmedP120 billion as the auction committee was forced to reject or partially award bods for the three- and seven-year T-bonds.

In a memorandum to all government securities eligible dealers, Bureau of the Treasury officer-in-charge Sharon Almanza said the government would auction off P60 billion worth of T-bills in October.

The short-dated T-bills will be offered at P5 billion each, with benchmark tenors of 91, 182 and 364 days every Mondays.

For the long-term debt securities, Almanza said the Treasury plans to raise a total of P90 billion every Tuesday next month. Broken down, the government would offer P30 billion worth five-year bonds, P30 billion in seven-year bonds, and P30 billion worth of 10-year bonds.

The Philippine government borrowers heavily from both onshore and offshore creditors to plug the country’s ballooning budget deficit, as it continues to spend more than what it earns.

Latest data from the Treasury showed that the government’s budget deficit narrowed by 12.1 percent to P732.5 billion from January to August this year from a year-ago level of P833 billion.

This, as revenue collections went up by a little over nine percent to P2.58 trillion while expenditures inched up only by 3.5 percent to P3.31 trillion.

For this year, the government plans to borrow at least P2.21 trillion, of which about 75 percent or P1.65 trillion would come from domestic sources, while 25 percent or P553.5 billion would be from foreign creditors.

So far, the government’s gross borrowings jumped by 25 percent to P1.55 trillion from January to July this year versus last year’s P1.24 trillion. Domestic borrowings surged by 28.4 percent to P1.17 trillion from P909.07 billion, while external debt grew by 15.3 percent to P387.88 billion from P336.48 billion.

Last Wednesday, the Philippines initially raised $611.2 million, three times oversubscribed from an initial amount of $200 million, as it priced the  5.5-year onshore retail dollar bonds at 5.75 percent.

The RDB offer is part of the government’s goal of financial inclusion for all Filipinos, providing investors a tool to diversify their investment portfolio aside from the usual peso retail treasury bonds (RTBs).

Similar to RTBs, the retail dollar bonds are fixed-income instruments issued by the government that are low-risk, affordable, and convenient.

Filipinos can invest for as low as $200 and in multiples of $100 thereafter until Oct. 6.

“By offering US dollar-denominated instruments that can match natural cash flows, retail investors, especially our overseas Filipino community, are not only guaranteed a safeguard from potential FX (foreign exchange) risks, but more importantly, an opportunity to maintain the value of their hard earned US dollar savings,” Almanza said.

For his part, Finance Secretary Benjamin Diokno said the second offering of the retail dollar bonds “is a big leap towards achieving financial inclusion for our citizens, especially our dollar-earning overseas Filipino workers.”

In 2021, the Philippines raised $1.6 billion via the issuance of five and 10-year retail dollar bonds.

According to Diokno, the Marcos administration has embarked on a six-year economic and social transformation agenda that endeavors to achieve real and tangible change for the Filipino people.

“With your investments, we manifest a better life for our families, communities,and the nation at large,” Diokno added.