Government borrows 66% more in 7 months

Bulk of P840 billion borrowings sourced locally

MANILA, Philippines — The government’s gross borrowings in the first seven months of the year jumped by 66.21 percent year-on-year as both domestic and foreign debt increased during the period, the Bureau of the Treasury (BTr) reported.

Based on the latest BTr data, gross borrowings from January to July 2019 reached P839.75 billion, higher than the P505.22 billion level in the same period last year.

This is already equivalent to about 70 percent of the national government’s P1.19 trillion borrowing program for the full year.

It was, however, slightly lower than the P840.84 billion borrowings recorded in the first half of 2019, due to the net repayment of debt amounting to P1.09 billion last July.

 “(There was) higher amortization than inflows from borrowings (last July),” National Treasurer Rosalia De Leon said in a text message.

The government borrows from both local and foreign creditors to plug its fiscal deficit, which is currently capped at 3.2 percent of gross domestic product (GDP) this 2019.

Based on Treasury data, bulk or P611.06 billion of total borrowings as of end-July came from domestic lenders, 87.23 percent higher than the P326.36 billion recorded in the same period of 2018.

About P261.5 billion of this amount came in the form of fixed-rate Treasury bonds, while P113.72 billion was sourced from the issuance of Treasury bills.

The remaining P235.83 billion of the domestic debt was raised through the issuance of five-year retail Treasury bonds last March, which were priced at a coupon rate of 6.25 percent.

Meanwhile, Treasury data also showed that external borrowings in the first seven months of the year rose by 27.86 percent to P228.69 billion from P178.86 billion a year ago.

The BTr said P78.04 billion of this amount was sourced from the issuance of 10-year US dollar-denominated global bonds last January. The debt papers carried an all-in yield of 3.75 percent, 110 basis points higher than the US Treasury rates.

In addition, about P43.49 billion came the offering of eight-year euro-denominated securities last May, which were priced at a coupon rate of 0.875 percent, 70 basis points over benchmark.

Three-year panda bonds, which were floated a week after the euro bonds, also accounted for P18.86 billion of the total foreign debt. The securities fetched a coupon rate of 3.58 percent, translating to a tight spread which is 32 basis points above the benchmark.

On the other hand, multilateral agencies--including the World Bank, Asian Development Bank and the Japan International Cooperation Agency, among others--provided P64.69 billion in program loans and P23.61 billion in project loans during the period.

The national government’s outstanding debt stood at P7.8 trillion as of end-July 2019, according to data from the Treasury. This was 0.8 percent lower than the P7.87 trillion posted the previous month.

For 2019, the national government is expected to borrow P1.19 trillion, 20 percent higher than the 2018 program of P986 billion, in expectation of the higher fiscal deficit ceiling this year.

Of the total borrowings this year, P297.2 billion is projected to come from foreign lenders, while the remaining P891.7 billion would be sourced from domestic creditors.