Wake Up, Philippines!

Govt borrowing more in ’09

Posted in Department of Finance/DOF, Social Issues/Concerns, Sovereign Debts by Erineus on February 24, 2009

The Philippines will increase foreign and local borrowings to finance a higher budget deficit this year, Finance officials said yesterday.

The Development Budget Coordination Committee now expects a higher budget deficit of P160 billion, or 2 percent of the gross domestic product, from a revised forecast of P102 billion, to prepare for the full impact of the global financial crisis this year.

Slowing economic growth is crimping tax collection and the government is spending more to counter faltering exports.

Finance Secretary Margarito Teves said government might favor increasing its local-currency bond sales to fund the bigger budget shortfall.

“We will determine how many percent of the additional deficit will be sourced locally, and how many percent will be sourced from foreign sources,” Teves said in an interview yesterday in Phuket, Thailand. “More could be sourced locally.”

The final deficit target will be subjected to a “last- minute” review before it is released on Feb. 25, Teves said. The shortfall will “definitely be more than 1.2 percent,” he said.

The Philippines already raised its projected borrowings this year by 16.5 percent to P509.9 billion from P437.1 billion after revising the budget deficit ceiling to P102 billion, or 1.2 percent of GDP, from an initial target of P40 billion, or 0.5 percent of GDP.

The government had planned to secure about 76 percent of the total borrowings from domestic sources through the issuance of treasury bills and bonds and 24 percent from foreign commercial sources and multilateral lending agencies.

National Treasurer Roberto Tan yesterday confirmed to reporters that the government would adjust its borrowing program amid a much higher budget deficit.

He said the Philippines would raise its official development assistance loans to $1.75 billion this year from the programmed $1.1 billion.

Tan said the government was now negotiating with Japan International Cooperation Agency for a program loan ranging from $250 million to $300 million to co-finance the social protection program of the World Bank.

He added that the Philippines also hoped to finally draw $350 million worth of ODA loans mainly from World Bank and Asian Development Bank this year.

“We expect more program loans this year. We are getting additional loans against the program,” Tan said.

He said the Philippines was also not ruling out the possibility of tapping the international bond market again this year after raising $1.5 billion from the sale of 10-year US-dollar denominated benchmark bonds early January.

By Lawrence Agcaoili

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