Gross borrowings jump in October

THE NATIONAL GOVERNMENT’S gross borrowings jumped by 23.4% in October as domestic debt surged, the Bureau of the Treasury (BTr) said.

Data from the BTr showed that gross borrowings rose to PHP 225.202 billion in October from PHP 182.429 billion in the same month a year ago.

Gross domestic debt more than tripled to PHP 174.632 billion in October from PHP 56.733 billion a year ago. This accounted for more than three-fourths or 77.5% of total borrowings during the month.

Broken down, domestic debt consisted of PHP 90 billion in fixed-rate Treasury bonds, PHP 71.78 billion in retail onshore dollar bonds, and PHP 12.852 billion in Treasury bills.

Meanwhile, gross external borrowings declined by 59.8% to PHP 50.57 billion in October from PHP 125.696 billion a year ago.

This was composed of PHP 42.514 billion in program loans and PHP 8.056 billion in new project loans.

For the 10-month period, gross borrowings stood at PHP 1.975 trillion, 1.5% lower than PHP 2.006 trillion in the same period a year earlier.

Domestic borrowings slipped by 0.99% to PHP 1.519 trillion during the January-to-October period, from PHP 1.535 trillion a year ago. This accounted for 76.9% of total borrowings for the period.

Fixed-rate Treasury bonds made up the bulk or PHP 1.055 trillion of local debt, followed by retail Treasury bonds (PHP 252.091 billion), Treasury bills (PHP 139.697 billion), and the retail onshore dollar bonds (PHP 71.78 billion).

Meanwhile, external debt in the 10 months to October dropped by 3.3% to PHP 456.311 billion from PHP 471.655 billion.

This consisted of PHP 187.573 billion in program loans, PHP 163.607 billion in global bonds, and PHP 105.131 billion in new project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that higher borrowings in October were due to the government’s sale of retail dollar bonds.

The government raised $1.26 billion from the first retail dollar bond offering under the Marcos administration. This was higher than the minimum issue size of $200 million but below the $1.6 billion raised at the maiden retail dollar bond auction in 2021.

The dollar-denominated five-and-a-half-year bonds fetched a coupon rate of 5.75% and were awarded at rates ranging from 5% to 5.75%, bringing the average to 5.509%.

Mr. Ricafort also said that elevated interest rates also drove borrowing costs higher.

The Bangko Sentral ng Pilipinas (BSP) delivered a 25-basis-point (bp) off-cycle rate hike in October, bringing the benchmark rate to a 16-year high of 6.5%. It kept rates steady at its latest policy meeting in November.

Since May 2022, the central bank has raised borrowing costs by a cumulative 450 bps.

“Going forward, lower global crude oil and other commodity prices that help ease inflation towards the target of the central bank would eventually support a pause or even cuts in policy rates, especially in 2024, and thereby help reduce new government borrowings and debt servicing bill,” Mr. Ricafort said.

“Tax and fiscal reform measures would structurally improve tax revenue collections and could lead to more disciplined government spending, thereby helping narrow budget deficits and the borrowings needed to finance the budget deficit,” he added.

In the January-to-October period, the budget deficit narrowed by 8.45% to PHP 1.018 trillion from a year ago. This was equivalent to 67.88% of the full-year PHP 1.499-trillion deficit program.

This year, the National Government set its borrowing program at PHP 2.207 trillion, consisting of PHP 1.654 trillion from domestic sources and PHP 553.5 billion from foreign creditors. — Luisa Maria Jacinta C. Jocson