Gov’t borrowings down 42%

MANILA, Philippines - Borrowings by the government fell by nearly 42 percent last year, the Department of Finance reported yesterday.

The government borrowed P554.7 billion from January to December 2013, significantly lower than the previous year’s P955.15 billion largely due to the decline in maturing debts.

The government borrows from both local and foreign sources to pay maturing obligations and plug the deficit in its budget.

Domestic borrowings, incurred mainly from the sale of Treasury bills and bonds, accounted for P520.93 billion or 93.9 percent of total borrowings.  The amount represented a 34.76-percent decrease from the P798.53 billion borrowed in 2012.

The balance of P33.77 billion came from external sources.  This was down 78.44 percent year-on-year as the government relied heavily on domestic debt to help temper substantial appreciation pressures on the exchange rate.

Foreign borrowings are done through the sale of sovereign bonds in the international capital market and by tapping cheap loans, in the form of official development assistance (ODA), from multilateral development institutions.

The biggest sources of ODAs are Asian Development Bank, the World Bank and Japan International Cooperation Agency.

The government also paid P235.59 billion in maturing liabilities during the period, 49.5 percent lower than what it spent for debt payments in 2012.

The decline in maturing obligations was due to the drop in interest rates as well as initiatives  taken by the government to contain debt. Interest rates on the government’s short-term borrowings fell to record lows last year with the benchmark rates for T-bills falling  below one percent.

In December alone, the government borrowed P14.45 billion, down 85.89 percent from the same period in 2012. A big chunk of the new debt or P11.65 billion came from the domestic market.

For this year, government borrowings are expected to reach P730 billion, 2.1 percent higher than the original plan of P715.04 billion.

The Aquino administration plans to borrow more from overseas investors to take advantage of cheap loans to fund massive reconstruction and rehabilitation efforts for the storm-ravaged Eastern Visayas.