Public sector external debt rose 43% in Q2 to $3.9B

Photo courtesy of Bangko Sentral ng Pilipinas Facebook Page

Public sector appetite for foreign debts increased in the second quarter after the Bangko Sentral ng Pilipinas (BSP) approved $3.9 billion of fresh external borrowings by the government to fund sustainability and infrastructure projects.

The amount of new external debts cleared by the Monetary Board (MB)—the highest policymaking body of the BSP—was 43 percent higher compared with a year ago, data released on Monday by the central bank showed.

Dissecting the BSP’s report, the public sector foreign borrowings approved by the MB in the second quarter consisted of the $2 billion that the Marcos administration raised during its first trip to the international debt market this year.

READ: External debt up in Q1, says BSP

Recall that the government sold $1 billion each via 10-year debt securities and 25-year sustainability notes during its US dollar bond offering last May.

The BSP-approved external debts also consisted of project loans with a combined worth of $1.9 billion.

“These borrowings will fund the National Government’s general budget financing and financing and refinancing of assets in line with the Republic of the Philippines’ Sustainable Finance Framework ($2 billion) and transport infrastructure projects ($1.9 billion),” the BSP said.

Oversight

Under the law, prior approval of the MB is required for all foreign loans to be contracted or guaranteed by the government.

Similarly, all foreign borrowing proposals of the government, including those of agencies and state-run financial institutions, are required to be submitted for approval in principle by the MB before the commencement of actual negotiations.

READ: Gov’t debt stock eases to P14.93T

These steps are meant to help the BSP ensure that external debt requirements are kept at manageable levels, which is part of its mandate to support external debt sustainability.

The Marcos administration is planning to borrow a total of P2.57 trillion from creditors at home and abroad in 2024 to help bridge its budget deficit, which is projected to hit P1.5 trillion this year.

Finance Secretary Ralph Recto had said the government would remain “prudent” in its debt management by continuing to adopt a 75:25 borrowing mix in favor of domestic sources.

Earlier this month, Recto said the government was eyeing a return to the US dollar bond market and a possible sale of “samurai” bonds to raise an additional $3 billion as part of its external borrowing plan for this year. INQ