Government eyes more borrowings to plug budget gap

Amid COVID-19 outbreak

MANILA, Philippines — The country is planning to borrow more from domestic and foreign debt markets to plug the wider budget deficit this year arising from lower revenue collections amid the spread of the coronavirus disease 2019 or COVID-19, according to the Department of Finance.

DOF Secretary Carlos Dominguez said the government is mulling the possibility of increasing its borrowing plan for the year as the projected budget shortfall could reach 3.6 percent of gross domestic product instead of the programmed 3.2 percent of GDP, if the COVID-19 threat lingers until the middle of the year.

Dominguez said the borrowing program for 2019 would be raised equivalent to the amount of the projected shortfall.

Dominguez announced Tuesday that government revenues could decline by P91 billion if the virus outbreak lingers until midyear.

The DOF chief said the additional borrowings would be sourced from both domestic and foreign creditors.

Dominguez said about 70 percent of the additional borrowings would be sourced locally, while the remaining 30 percent would come from international creditors.

The government borrows from both domestic and external lenders to plug the expected deficit in budget as it continues to spend more than the amount of revenues it raises.

For this year, the government is planning to ramp up its borrowings to P1.4 trillion, 17.6 percent higher than the P1.19 trillion borrowing program for 2019.

Of the total amount, about 75 percent or P1.047 trillion will come from local sources, while the remaining 25 percent or P353.2 billion will come from foreign creditors.

Total offshore commercial borrowings through the issuance of dollar, euro, samurai, and panda bonds are expected to reach $3.5 billion, while program loans, project loans and official development assistance would account for about $3 billion.

Dominguez said the wider budget deficit is necessary as the government does not plan to cut its spending program particularly for massive infrastructure projects under the Build Build Build program despite the expected decline in revenues due to the virus scare.

“Despite these difficulties, we are not contemplating a reduction in our expenditures. Our Build Build Build will go full blast, so will other programs of the government,” Dominguez said earlier.

Nevertheless, Dominguez expressed confidence that a wider budget deficit would not adversely impact the Philippines’ credit rating, as the shortfall could be easily “financeable” through additional borrowings.