Government mulls cut in domestic borrowings in Q3

MANILA, Philippines — The Bureau of the Treasury (BTr) may cut the government’s domestic borrowing program for the third quarter of 2019 given its healthy cash flow and slower spending in the first half of the year, a top official said yesterday.

In an interview, National Treasurer Rosalia de Leon said the volume of the government’s onshore borrowing plan for the July to September period would likely be lower than the P315 billion set for the second quarter of 2019.

“In terms of the volume (for the third quarter), most likely the volume would be lower than Q2,” De Leon said, adding that the size may fall below P300 billion. 

The National Treasurer explained that there may be a decline in the domestic borrowings for the next quarter as the government still has a healthy cash buffer following the success of its fund raising activities both in the onshore and offshore markets in the first two quarters of the year.

This came as government spending suffered due to the delay in the passage of the 2019 national budget.

 “Spending was a bit weaker in the first two quarters, but at the same time, we’ve been able to maintain our borrowings given the auction performance and also in terms of the external (borrowings). The collections are also pretty good, so we have more than enough cash to be able to finance the sustained higher spending for the next quarter or so,” De Leon said.

The official pointed out that there is only a small volume left to be raised under the government’s onshore borrowing plan for the rest of the year, which is set at P891.7 billion.

However, De Leon said the volume for the third-quarter borrowing program would still depend on the government’s spending performance following the budget impasse.

“We will have to calibrate, because there’s a catch-up plan in terms of the disbursements. And there’s commitment from the agencies that they would really be pushing hard in terms of the spending. So we will have to see how spending goes this month of June and then from there…we’ll have to see whether we would (do) a little bit of softening in terms of the third quarter (borrowing program),” she said.

She said the government is set to conduct a cash-programming meeting this week to evaluate the spending performance and the cash requirements going forward.

The national government borrows from both local and foreign creditors to plug its fiscal deficit which is currently capped at 3.2 percent of the gross domestic product (GDP) this 2019.

For 2019, the Philippines’ borrowings is programmed to increase to P1.19 trillion from P986 billion last year on expectation of the higher fiscal deficit.

A total of P891.7 billion of this amount is expected to come from domestic lenders.

So far, the government has already programmed P360 billion under its domestic borrowing plan for the first quarter, and another P315 billion for the second quarter.

BTr data also showed that the government’s gross onshore debt in the first quarter of the year has reached P490.62 billion, more than eight times higher than the P61.78 billion recorded in the same period last year.