More borrowings set amid fiscal blowout

By Ruben Hortelano

06/16/2009

The government is stepping up borrowings this year with an initial plan for a yen-denominated sovereign issue, or Samurai bonds, anytime soon worth $500 million after economic managers adjusted the fiscal shortfall limit to as much as P250 billion, which would be the country’s biggest ever.

National Treasurer Roberto Tan said proceeds from the Samurai bonds float will only partly cover the increased borrowing requirements this year.

The bond issue would be guaranteed by the Japan Bank for International Cooperation (JBIC).

Tan said plans for more overseas commercial borrowings had not been ruled out.

The Cabinet-level Development Budget Coordinating Committee (DBCC) approved last week an increase in the budget deficit ceiling to a record P250 billion, or 3.2 percent of gross domestic product (GDP), from P199.2 billion, or 2.5 percent of GDP.

The DBCC also allowed the widening of the total borrowing program to reach 57.6 percent of GDP or P223.78 billion from an original 54.8 percent due to the expected fiscal blowout.

The DBCC also cut the revenue targets of both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) that would require more borrowings to fill in the fiscal gap.

The blowout already resulted yesterday in banks demanding higher yields on debt papers issued by the Bureau of Treasury yesterday that led to the rejection of bids for six-month and one-year Treasury bills. The 91-day benchmark rate was allowed to rise by 11.1 basis points to 4.494 percent.

Rising borrowings already has been reflected in the March debts data that showed national government debts rising 1.5 percent or P65 billion more from a month ago to P4.229 trillion.

The debt translates to P47,785.31 for each of the 88.5 million Filipinos recorded as of 2007.

The government said 44 percent or P1.842 trillion of the total debts were owed to foreign creditors while 56 percent or P2.387 trillion were domestic debts.

“The domestic debt increased by P93 billion or 4.1 percent from end-February due to the net issuance of government securities,” the Treasury said.

The decline in foreign debt by 1.5 percent or by P28 billion was due to net repayments totaling P43 billion, it said.

Contingent debts, which are debts incurred by public sector entities bearing government guarantees fell from a month ago to P553 billion.

BSP deputy Gov. Diwa Guinigundo said the economy will escape a recession if monetary and fiscal policies complement each other.

The BSP issued a veiled criticism on the fiscal program of the government after the government released disappointing first quarter GDP figures showing the economy contracted 2.3 percent from the previous quarter by wondering out loud where the supposed front-loading of the P300-billion economic resiliency program went.

The International Monetary Fund after a one-week assessment of the country’s economic and fiscal figures revised its estimates to a one percent contraction for the economy this year.

“We (the government) need to work hard to ensure we avoid having it (recession) because of poor public policy,” Guinigundo said.

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