BSP Gov. Benjamin Diokno. INQUIRER file photo
MANILA, Philippines—Amid a high-interest rate environment, the Marcos administration will be “opportunistic” in its foreign commercial borrowings while keeping the bulk of financing for its budget sourced locally, Finance Secretary Benjamin Diokno said.
While he will still consult with National Treasurer Rosalia de Leon, Diokno told reporters that “if there is a good opportunity to borrow in foreign currency, we’ll do that.”
So far this year, the Philippines already raised $2.8 billion out of its $7-billion offshore commercial borrowings program. It borrowed $550-million through yen-denominated “green” samurai bonds in April, on top of $2.25 billion in US dollar-denominated global bonds last March, which included the Philippines’ first-ever ESG or environmental, social, and (corporate) governance securities.
In the past, the Philippines also ventured into the euro as well as renminbi-denominated panda debt markets.
“Right now, I think our bias is to rely on domestic borrowings,” Diokno said.
Of the P2.2-trillion gross borrowings programmed for 2022, three-fourths or P1.65 trillion will come from domestic sources, mainly through the issuance of treasury bills and bonds. The Philippine government borrows more locally to temper foreign exchange risks while taking advantage of a liquid financial system.
This year’s borrowings will be smaller than the gross financing amounting to P2.58 trillion last year, which was also down from the record P2.74 trillion in 2020, when the government scrambled to beef up its war chest against the health and socioeconomic crises inflicted by COVID-19.
The Bureau of the Treasury (BTr) will auction off a total of P200 billion in T-bills and bonds in July, the first month of the Marcos Jr. administration, despite rising yields sought by local creditors jittery due to aggressive interest rate hikes by central banks here and abroad to rein-in high inflation globally.
Diokno also wasn’t too worried about the national government’s ballooning debt, citing that the bulk of outstanding obligations have medium- to long-term maturity. “It will take us a long time to pay them,” he said.
Out of the record P12.76-trillion outstanding public debt as of end-April, BTr data showed that P8.19 trillion—or 65.7 percent—of total were long-term or maturing in over 10 years, while P3.65 trillion or 29.3 percent were medium-term obligations needed to be repaid between one and 10 years.
The Department of Finance’s (DOF) estimates had shown that the concessional or low-interest foreign loans obtained amid the prolonged fight against COVID-19 have to be repaid until 2060, spanning two generations.
The national government’s outstanding debt was expected to hit a new record-high of P13.42 trillion by yearend. Even if gross domestic product (GDP) would grow by 7 to 8 percent as targeted in 2022, the debt-to-GDP ratio — a better measure of a country’s capability to repay its obligations — had been projected to inch up to 60.9 percent of GDP, from the 16-year-high 60.5 percent last year.
At the end of the first quarter, debt-to-GDP reached 63.5 percent, the highest since 2005’s 65.7 percent, as the better-than-expected 8.3-percent GDP growth during the January-to-March period was outpaced by the 17.7-percent year-on-year jump in borrowings in the same three-month period.