The government’s borrowings significantly fell in the first seven months of 2013 from a year ago, substantiating officials’ claims that the country was becoming less dependent on credit.
Documents from the Department of Finance showed that the borrowings in the first seven months fell by an annual rate of 35 percent to P297.38 billion.
The government borrows funds to pay maturing obligations and cover the deficit in its budget.
The reduced borrowings was attributed to the decline in maturing obligations during the period. The drop in borrowings came about as maturing liabilities paid by the government fell year-on-year by 29 percent to P173.55 billion.
The government borrows from both local and foreign sources. This year, however, it chose to reduce its foreign borrowings in favor of domestically sourced credit.
In particular, it has decided not to sell bonds in the international capital market and limit its foreign borrowings by securing loans from development institutions such as the World Bank and the Asian Development Bank.
Domestic borrowings accounted for P272.03 billion of total government borrowings. This marked a year-on-year drop of 25 percent.
Domestic borrowings are incurred mainly from the sale of treasury bills and bonds in the local market.
Foreign borrowings, which were all concessional loans from development lenders, amounted to P25.35 billion from January to July. This was down by 73 percent year-on-year.
The government’s decision to forego the sale of bonds in the international capital market this year was meant to help reduce pressures on the exchange rate.
In particular, the government wanted to temper substantial appreciation pressures on the peso that led to the currency’s nearly 7-percent rise against the US dollar last year.
Although the Bangko Sentral ng Pilipinas believes that it is healthy for the market to determine the exchange rate, the regulator will also need to intervene from time to time to prevent the local currency from fluctuating too sharply.
The appreciation of the peso in 2012 adversely affected the export sector.
The traders and manufacturers explained that the competitiveness of Philippine-made goods in the international market suffered because of the peso’s sharp appreciation last year.