Marcos government to continue foreign borrowing program

MANILA, Philippines — The Marcos administration will keep its doors open to offshore borrowings, even in the face of a depreciating peso, but vows to source the bulk of its debts from the domestic market.

According to Finance Secretary Benjamin Diokno, the government will depend on local lenders for its financing requirements, similar to the strategy taken by the Duterte administration.

“We usually prefer to borrow domestically to not be pressured by the dollar (because) if you are heavily indebted in foreign currency, you will be affected by fluctuations,” Diokno told reporters.

However, Diokno said the Marcos administration would remain open to borrowing from abroad as long as conditions prove favorable for the government. He said he would discuss with the Bureau of the Treasury the volume that needs to be raised for the rest of the year.

“Let’s put it this way. We will be opportunistic. If there is a good opportunity to borrow in foreign currency, we will do that. Right now, our bias is to rely on domestic borrowings,” Diokno said.

For this year, the government wants to borrow a total of P2.47 trillion – P1.91 trillion from domestic sources, P560.58 billion from foreign financiers – to cover for its budget gap.

Based on records, the government has raised 37 percent or P924.43 billion of that program as of May, leaving the Marcos administration the task of generating the larger part of the volume.

Diokno said one of the options that can be explored by the Treasury is to enlarge the size of its weekly borrowings from the debt market through the sale of Treasury bills (T-bills) and Treasury bonds (T-bonds).

The Treasury auctions every Monday P15 billion in T-bills and offers every Tuesday P35 billion in T-bonds. For July, the first month of the Marcos administration, the borrowing plan was set at P200 billion, comprised of up to P60 billion in T-bills and P140 billion in T-bonds.

Experts from the country’s leading universities told The STAR that the government should think twice about turning overseas for its financing needs, with the local currency on a decline.

De La Salle University economics professor Maria Ella Oplas said debt repayment becomes too costly when the peso is struggling against the US dollar.

Ateneo de Manila University economics professor Leonardo Lanzona said that external loans, especially those denominated in dollars, may be too expensive for the government to afford.

The peso on Wednesday breached the 55 to $1 level for the first time in almost 17 years as its struggles worsen at the height of monetary tightening and the war in Europe.