Gov't to rely on foreign borrowings to fund deficit

The government will continue to rely on foreign borrowings to fund the expected P62.5-billion budget deficit for this year, Finance Secretary Jose T. Pardo said yesterday.

"More than 60 percent of the needed financing will be sourced from external borrowings and only 39 percent will come from domestic sources," Pardo said.

He said the government is eyeing about $3 billion in foreign borrowings this year of which $1.5 billion will come from official development assistance (ODA), multilateral and bilateral financing sources while the other $1.5 billion will be sourced from bond flotations.

While Pardo said the government does not want to rely solely on borrowings through the flotation of government securities and bonds, he would also like to source funds from the capital market and from privatization of government assets.

Since government will try to avoid putting pressure on the domestic market, Pardo said, the government will also try to maintain a low interest rate regime "when we can but we will not put at risk our foreign exchange."

"The government will have to do a balancing act," he added.

Pardo reiterated that the deficit figure is not really an issue with the International Monetary Fund (IMF) as much as the revenue figures are.

In fact, he said, the IMF is more concerned with the privatization of such government assets as the Philippine National Bank and the National Power Corp.

Pardo also said the government would still have to do some fiscal tightening to stay within the programmed P62.5-billion deficit this year.

But if the government is able to successfully raise enough funds from revenue generation and foreign borrowings, Pardo said there is a possibility that additional expenditures amounting to about P22 billion can be restored to the budget.

This would include the P10 billion for the Internal Revenue Allotment (IRA) and some P12 billion in various cuts.