Philippines to reduce domestic borrowing

The Aquino administration may reduce its domestic borrowing for 2011 after the better-than-expected sale of Retail Treasury Bonds (RTBs).

Department of Finance (DOF) Secretary Cesar Purisima told reporters Thursday that there will be less borrowing because of the P104 billion raised from the recently concluded RTB sale. “Maybe it will reduce our program by P104 billion,” Purisima said.

The government sold P103.967 billion worth of five- and 10-year RTBs to refinance maturing debt and help plug the budget deficit.

Under the original program for 2011, the government was supposed to borrow P754.6 billion to fund social services and infrastructure project-related expenditures that may not be covered by revenue collections.

The bulk of the borrowing would likewise be used to refinance maturing obligations. Of the borrowing program for this year, 73 percent, or about P563.33 billion, would be sourced from the domestic market through the sale of Treasury bills and bonds. The remaining 27 percent, or P191.3 billion, would be secured from foreign markets through the sale of sovereign bonds and concessional official development assistance (ODA) from foreign donors.

“The balance of the amount that we’ll borrow based on the plan is much less,” Purisima said. He said the adjustments in the borrowing program would still be made and take place in the remaining three quarters of the year.

“We have to see the first quarter results before we re-evaluate our program,” he said. The government wanted to raise P114 billion in the first three months of the year from the sale of T-bills and bonds, but demand for higher interest rates in the first two months prompted the Bureau of Treasury to reject some bids for both short- and longer-dated IOUs.

Purisima said the government continues to look at various debt instruments that it could make use of for the rest of the year. “There are instruments that are available to us, including the Samurai [Japanese yen loan], including the dollar, the global peso notes and local bonds,” he said.

“The earliest that we could do a Samurai [loan] is April, that is, if we decide to do it,” he added.

Economists at state-run Philippine Institute for Development (PIDS) however said that the government must reconsider its no-new tax policy.