MANILA, Philippines - The government is looking at other optionsto fund a bigger budget deficit this year despite a commitment from the Japan Bank for International Cooperation to help raise up to $1 billion through the issuance of "samurai" bonds.

At the same time, the Bureau of the Treasury announced its plan to issue some P110.5 billion worth of treasury bills and bonds in the third quarter.

With an expected budget deficit of P250 billion for 2009 and after spending P123.2 billion over the budget from January to May, the government needs to borrow an additional P122 billion.

The government was earlier expecting a deficit of only P199.2 billion, borrowings for which have already been programmed.

But officials were forced to increase the deficit ceiling to P250 billion after estimates showed that tax collections could fall short of target. This was the fourth revision from the original budget deficit target of P40 billion.

According to the Treasury, it is scheduled to bid out seven batches of P8.5 billion in treasury bills?in tenors of 91 days, 182 days and 364 days?every two weeks over the next three months.

In the same period., the Treasury is set to offer six batches of P8.5 billion in treasury bonds?three of 5-year paper and three of 10-year issues.

Finance Secretary Margarito B. Teves said the government was also open to tapping more official development assistance, borrowing more from commercial sources like global bonds as well as local investors.

?The DOF is not closing its doors on these other sources,? Teves said, adding that the agency would go ahead with the samurai issue if the price would be competitive.

Samurai bonds are debt instruments that are issued in Japan by foreign entities.

In the five months to May, the government increased its total borrowings by 19.7 percent as the budget deficit grew by more than five times during the period.

Documents from the Treasury showed that in the first five months, the government borrowed P258.59 billion from here and abroad, compared to the P216.05 billion in the same period of 2008.

During President Macapagal-Arroyo?s visit to Japan last week, Teves signed with JBIC president Hiroshi Watanabe a memorandum of understanding to cooperate on a financial support of up to $1 billion for the Philippines.

The last time that the Philippine government tapped the Japanese financial market was in 2001 with the issuance of $414 million or 50 billion yen worth of shibosai bonds?which were directly sold to investors instead of going through banks.

The Philippines will sell Samurai bonds only if the issuance will be covered by a guarantee from JBIC and if the guarantee fee to be asked by the Japanese institution is affordable. The two parties have yet to agree on the amount of guarantee fee.

Without a guarantee from JBIC, borrowings via Samurai bonds may be costly. But if the Philippine government will be asked to pay a high guarantee fee, then it might as well issue sovereign bonds than Samurai bonds, a finance official said.