PH to borrow more locally for postpandemic comeback
While the share of the Philippines’ debt to its economy will return above the 50-percent level in the next two years as it borrows more to finance recovery postpandemic, the Bureau of the Treasury will get the bulk from domestic sources.
On Monday, the Treasury sold P28 billion in T-bills—exceeding the P20-billion offering—as rates declined across the board.
The Treasury awarded P7 billion, or more than the P5-billion offer, in the benchmark 91-day debt paper at an average rate of 2.038 percent, down from 2.046 percent last week.
It sold another P7 billion, also exceeding the P5-billion offer, in 182-day IOUs at 2.099 percent, down from 2.118 percent previously.
The 364-day treasury bills fetched an annual rate of 2.378 percent, down from 2.42 percent during the previous auction. The Treasury awarded P14 billion instead of just P10 billion.“Rates were still within inflation, and the bias towards safe haven prevails,” National Treasurer Rosalia de Leon said. Headline inflation in May eased to a six-month low of 2.1 percent.
Tenders across the three tenors totaled over P96 billion, making the auction almost five times oversubscribed.
De Leon said the Treasury would offer another P10 billion in one-year T-bills via its tap facility window.
Last month, the Cabinet-level Development Budget Coordination Committee projected the debt-to-gross domestic product (GDP) ratio would jump to 51.5 percent in 2021 and 52.3 percent in 2022. It was pegged at 49.8 percent this year, which is already equivalent to a record high P9.589 trillion.
Treasury data showed the last time the Philippines had a debt-to-GDP ratio above 50 percent was in 2010, at 50.2
percent.The debt metric reflecting a country’s ability to pay its obligations had gone down the past few years and even fell to a low of 39.6 percent last year.
But with tax and nontax revenues expected to weaken due to an upcoming recession, the government needs to raise more money to address the health and socioeconomic implications of COVID-19, or the disease caused by the new coronavirus. This means it will have to rely more on borrowings.
De Leon told the Inquirer last week that the Treasury was still firming up the actual amount of gross borrowings for the years 2020 to 2022, but “bias will continue to be in favor of onshore funding.”
Finance Undersecretary Gil Beltran told the Inquirer that the borrowing mix for 2020 was 76:24 in favor of domestic, while the ratio will be 75:25 from 2021 onwards.
Beltran explained that local debt “lowers risks due to absence of foreign exchange risks, supports local savings mobilization initiatives, promotes growth of the domestic financial system since most of domestic borrowing is done through issuance of government bills and bonds, and boosts tax collection since interest income is taxable.”
Of the Philippines’ P8.6-trillion debt stock as of end-April, two thirds, or P5.9 trillion, were raised locally, mainly through the sale of treasury bills and bonds. INQ
