Gov’t borrowings inch up to P3.93 T in 2016

MANILA, Philippines - Oustanding local government securities merely inched up last year even as the Duterte administration widened the budget deficit to accommodate higher spending, the Bureau of the Treasury reported yesterday.

A total of P3.93 trillion worth of Treasury bonds and bills were in the financial market by the end of last year, up 1.28 percent year-on-year.

T-bonds and T-bills are investment instruments issued to local investors every month. The government sells them in exchange for borrowed money to be paid with interest over a specific period of time.

T-bills have shorter payment terms of up to a year versus T-bonds, which can run from two to 25 years.

“Definitely we may see these issuances go higher this year. They want to make it bigger considering the budget deficit cap,” said Emilio Neri Jr., lead economist at Bank of the Philippine Islands.

For last year however, the increase in T-bonds and T-bills was notably controlled compared with that of the deficit, which widened more than five-fold as of November.

The full-year budget deficit – which indicates more revenues spent than earned – will be released later this month.

The government borrows from local and foreign investors to bridge the deficit and pay existing debts.

“Issuing more securities would also help them since that would mean more liquid market, increasing the frequency of options and steepening the yield curve,” Neri said.

A steeper yield curve, he said, would allow the government some leeway to control the interest of short-dated debts considering higher rates could be expected “this year and next year.”

Broken down, T-bills rose 8.89 percent to P287.94 billion last year, faster than that of T-bonds that increased only 0.72 percent to P3.65 trillion, data showed.

Higher rates do not bode well for the government, which will have to segregate more funds for debt payments instead of using them for public projects.

“For as long as the growth rate (of our debts) does not outpace our economic growth, that is okay,” Neri said.