Government to borrow P85B for GOCCs

MANILA, Philippines - The government is borrowing up to P85 billion on behalf of government-owned and controlled corporations (GOCCs) next year, officials disclosed yesterday.

The bulk of the amount would be for the borrowing requirements of the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked to sell the assets and manage the liabilities of state-owned National Power Corp. (Napocor).

The move is part of efforts to save on borrowing costs, Finance Secretary Cesar Purisima said yesterday.

“We thought it might be smarter for us if we avoid these charges if we let the national government borrow and lend it to GOCCs,” Purisima said during a hearing at the House of Representatives for the P1.816 trillion budget for 2012.

Citing estimates made by the Department of Finance (DOF), Purisima said the cost of borrowing may be lower by 50 basis points if it is the government that will borrow instead of the state-owned company.

Debt-laden GOCCs such as PSALM have been a major problem for the national government.

As of end-2009, Napocor’s total liabilities stood at $16.5 billion. PSALM was created in 2001 not only to handle the privatization of Napocor’s generation assets and contracted capacities but also to pay off the power firm’s debts.

Another thorn on the government’s side is the National Food Authority (NFA), the state-owned grains agency. The agency had debts amounting to P171 billion as of end-May 2010.

The Finance chief believes that consolidating the liability management of the various GOCCs would enable the government to better handle its debts.

This is because the government would be able to borrow at a lower cost which in turn would improve the country’s fiscal health.

When state-owned companies borrow, they seek sovereign guarantee for their borrowings to able to make it easier for them to convince investors to lend them money.

State-owned companies also shoulder a certain amount of premium when issuing new debt.

NFA is seeking to borrow P75 billion within the quarter as this would allow it to extend the maturity of its loans by 10 years.