Government borrowings slump in October

The national government’s (NG) gross borrowings fell in October as it borrowed significantly less from the domestic market, the Bureau of the Treasury (BTr) said.

Data from the BTr showed that total gross borrowings dropped by 42.6% to PHP 129.26 billion in October from PHP 225.2 billion in the same month a year ago.

Month on month, gross borrowings declined by 64.8% from PHP 367.18 billion in September.

Gross domestic borrowings slumped by 61.37% to PHP 67.46 billion in October from PHP 174.63 billion last year. The October 2023 tally reflected the government’s PHP 71.78-billion retail onshore dollar bond issuance.

In October this year, domestic borrowings consisted of PHP 45 billion in fixed-rate Treasury bonds (T-bonds) and PHP 22.46 billion in Treasury bills (T-bills).

Meanwhile, gross external debt increased by 22.21% to PHP 61.8 billion in October from PHP 50.57 billion a year ago.

This consisted of PHP 49.89 billion in program loans and PHP 11.91 billion in project loans.

“(The lower gross borrowings) could be partly brought by the budget surplus in October 2024 and the narrower budget deficit for the first 10 months of 2024 that fundamentally reduced the need for additional borrowings/debt by the National Government,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

In October, the NG posted a PHP 6.3-billion budget surplus, a turnaround from the PHP 34.4-billion deficit in the same month a year ago. This brought the 10-month budget deficit to PHP 963.9 billion, slimming from PHP 1.02 trillion gap a year ago.

“Furthermore, increased dividends/remittance of earnings/surplus of some GOCCs [government-owned or -controlled corporations] to the National Government in recent months also partly helped reduce the need for the NG to borrow,” Mr. Ricafort said.

As of October 2024, 52 GOCCs already remitted P95.9 billion in dividends, up 51% higher from the same period last year, the Department of Finance said last week.

“It is possible that the decline in the October borrowing is due to the fact that there are expectations that interest rates would decline further and some banks and investment houses have been undertaking a wait-and-see attitude before purchasing government securities,” Philip Arnold “Randy” P. Tuaño, dean of the Ateneo School of Government, told BusinessWorld via e-mail over the weekend.

The BSP has cut benchmark rates by a total of 50 basis points at its August and October meetings.

Ten-month period

Meanwhile, BTr reported that gross borrowings in the January-to-October period jumped 22.98% to PHP 2.43 trillion from PHP 1.98 trillion a year ago.

The bulk or 76.69% of the 10-month gross borrowings were from domestic sources.

Domestic debt stood at PHP 1.86 trillion, a 22.64% increase from PHP 1.52 trillion a year ago.

It was made up of P1.07 trillion in fixed-rate T-bonds, P584.86 billion in retail T-bonds, and P209.38 billion in T-bills.

External debt in the first 10 months rose by 24.09% to PHP 566.25 billion from PHP 456.31 billion a year prior.

This was composed of PHP 256.24 billion in global bonds, PHP 223.04 billion in program loans, and PHP 86.97 billion in new project loans.

For the rest of the year, Mr. Tuaño said that borrowings are still expected to increase in peso value terms as the budget deficit continues to widen.

The Treasury is possibly waiting for interest rates to decline further and thus limited sales of government securities in October, he added.

The Monetary Board could deliver another rate cut either at its December meeting or the meeting after, Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. said earlier.

“Going forward, lower US and local rate cuts would help reduce the NG’s interest payments/debt servicing costs, thereby would reduce the need for additional NG borrowings,” Mr. Ricafort said.

This year’s borrowing plan is set at PHP 2.57 trillion, with PHP 1.92 trillion coming from domestic sources and PHP 646.08 billion from overseas, according to the latest Budget of Expenditures and Sources of Financing data. – Aubrey Rose A. Inosante, Reporter