Foreign borrowings hit $11 billion

MANILA, Philippines — The Philippine government borrowed more from offshore creditors as foreign borrowings approved by the Bangko Sentral ng Pilipinas (BSP) jumped by 29 percent to $10.99 billion from January to September compared to last year’s level.

Data released by the central bank showed that the latest  figure was $2.47 billion higher than last year’s $8.52 billion.

From July to September,  the regulator approved $2.7 billion worth of public sector foreign borrowings, more than 15 times than last year’s $178.1 million.

The BSP said the approved borrowings for the third quarter consisted of four project loans worth $1.95 billion and one program loan amounting to $750 million.

“These borrowings will fund the national government’s program on economic recovery, environmental protection and climate resilience, as well as projects for the transport and agricultural sectors,” the BSP said. ?

In January, the government raised $3 billion after the Marcos administration forayed into the international debt market via the issuance of triple-tranche global bonds. The proceeds of the fund-raising activity will be used to finance the country’s budgetary requirements.

During the nine-month period, the BSP also approved $6.94 billion worth of project loans and $1.05 billion worth of program loans.

Public foreign borrowings approved by the central bank are expected to rise further within the fourth quarter as the national government recently raised $1.26 billion from the sale of its retail dollar bonds in October, exceeding the $1-billion borrowing target.

The Philippines plans to raise another $1 billion from the maiden issuance of Islamic or sukuk bonds by the end of November.

Last year, foreign borrowings approved by the BSP declined by 21.4 percent to $10.32 billion from $13.14 billion in 2021 due to lower bond issuances, as well as the significant drop in program loans.

All foreign loans to be contracted or guaranteed by the government need 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 under Letter of Instruction 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.

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  response measures.

The share of the budget deficit to the country’s economic output as measured by  gross domestic product eased to 7.3 percent of GDP last year from an all-time high of 8.6 percent in 2021.

The Cabinet-level Development Budget Coordination Committee aims to reduce the share of the budget deficit to national output as measured by GDP to 6.1 percent  in 2023 and 5.1 percent in 2024.

The country’s outstanding debt hit another all-time high of P14.35 trillion as of end-August, of which 68.2 percent or P9.79 trillion came from domestic sources, while 31.8 percent or  P4.56 trillion was sourced from foreign creditors.