BSP-approved foreign borrowings plunge 96% in Q3

MANILA, Philippines — Foreign borrowings approved by the Bangko Sentral ng Pilipinas (BSP) plunged by 96 percent to only $178.1 million in the third quarter from $4.66 billion in the same period last year.

The BSP only approved one public sector borrowing from July to September to fund the national government’s multisectoral nutrition project.

Due to the sharp drop in the third quarter, foreign borrowings approved by the central bank declined by 17.3 percent to $8.52 billion from January to September compared to P10.3 billion in the same period last year.

From January to March, the BSP approved the government’s global bond issuance worth $2.25 billion as well as three project loans worth $2.55 billion.

The Philippines braved the volatile global credit market last month, raising $2.25 billion from offshore commercial borrowing which includes the maiden $1 billion issuance of green bonds.

The amount will be used to fund a transportation project ($2.08 billion), COVID response measures ($300 million) and another infrastructure project ($175.1 million).

From April to June, the BSP approved the government’s Japanese yen-denominated or Samurai bond issuance equivalent to about $513.41 million, three project loans amounting to $2.16 billion and three program loans worth $869.72 million.

Of the amount, $869.72 million was allocated for the government’s pandemic response and recovery, including vaccine procurement and continuing requirements amid the global health crisis, while $513.41 million was set aside for general financing requirements.

Furthermore, the $1.75 billion borrowed from the Asian Development Bank will help partially bankroll the $4.3 billion South Commuter Rail project and another $405.99 million was allocated for bridge projects.

All foreign loans to be contracted or guaranteed by the government needs prior BSP approval under Section 20, Article VII of the 1987 Constitution.

Likewise, all foreign borrowing proposals by the national government, government agencies and government financial institutions have to be submitted for approval-in-principle by the Monetary Board before commencement of actual negotiations as mandated by the Letter of Instructions 158 issued in January 1974.

According to the BSP, it promotes the judicious use of resources and ensures that external debt requirements are at manageable levels, to support external debt sustainability.

Last year, foreign borrowings approved by the BSP declined by 26 percent to $13.1 billion from $17.7 billion in 2020.

The Philippines borrows heavily from foreign and domestic creditors to finance the country’s budget deficit as it spends more than what it actually earns. The country’s budget shortfall ballooned as the pandemic-induced recession pulled down revenue collections, while spending soared to finance COVID-19 response measures.

The country’s budget shortfall swelled to a record P1.67 trillion in 2021 as the pandemic-induced recession pulled down revenue collections, while spending soared to finance COVID-19 response measures.