DoF to wait for rate cuts before borrowing abroad

The Philippine government will wait for rate cuts from the US Federal Reserve and Bangko Sentral ng Pilipinas (BSP) before its planned external borrowings next year, according to the Finance chief.

“We’re waiting for the Fed to reduce interest rates, and I think the Philippines, our central bank, will also reduce policy rates,” Finance Secretary Ralph G. Recto told reporters at the Senate when asked about the government’s planned borrowings next year.

For 2025, the National Government set its borrowing program at PHP 2.55 trillion, 0.97% lower than PHP 2.57 trillion this year.

Gross domestic borrowings were set at PHP 2.04 trillion for 2025, while gross external borrowings were set at PHP 507.41 billion.

Mr. Recto told reporters earlier this month that the government is planning on issuing Japanese yen-dominated and US dollar-denominated bonds within the year.

Asked on Tuesday about the plans to issue these bonds, he replied: “We will be starting now.”

The Philippine central bank, which has kept interest rates steady at 6.5% in its past six meetings, earlier flagged a possible 25-basis-point (bp) cut at its meeting on Aug. 15.

The US Federal Reserve is expected to keep interest rates steady at a two-day policy meeting this week, Reuters reported.

“By awaiting potential rate cuts from both the Fed and BSP, the government aims to secure more favorable terms for its international debt issuance,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Vibes message.

“To maintain low interest rates for its substantial domestic borrowing plan, the government could focus on…implementing fiscal consolidation, fostering investor confidence, which can help the country achieve its financing goals while managing debt costs effectively.”

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message that the government should focus on boosting its revenue collection and efficiency to lower debt.

“There should be a balance in infrastructure spending to push growth, while reigning the spending of agencies,” he said.

Mr. Recto, who is a member of the central bank’s policy-setting Monetary Board, earlier said the country is on track for a cut in benchmark interest rates this year.

The BSP’s next policy meeting is on Aug. 15.

“In view of the National Government’s limited financial resources, it (government) needs to better manage the country’s debt over the long-term,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Foreign borrowings also need to be reduced and we need to increase local borrowings to manage foreign exchange risks, as a matter of prudence.” – John Victor D. Ordoñez, Reporter