Philippines: Government borrowings rise to P1.22 trillion

MANILA, Philippines — The government has raised P1.22 trillion from both domestic and foreign lenders in the first four months as it ramped up its borrowings to finance coronavirus response measures, according to the Department of Finance (DOF).

Citing data from the Bureau of the Treasury (BTr), the DOF said national government borrowings from January to April reached P1.22 trillion, the bulk of which was sourced domestically.

This was adjusted upward from the P919.47 billion total borrowings previously reported by the BTr to reflect the P300 billion short-term loan extended by the Bangko Sentral ng Pilipinas (BSP) under a repurchase agreement.

BTr data also showed that the new end-April figure is 84.3 percent higher than the P661.52 billion recorded in the same period last year.

According to the DOF, domestic debt accounted for P982 billion or 81 percent of the total borrowings from January to April.

Aside from the P300 billion short-term loan from the BSP, the amount was also raised from the issuance of Treasury bonds and bills.

The DOF said the remaining P237 billion, which accounted for 19 percent of the total borrowings, was sourced externally through a mix of concessional foreign loans and commercial bond issuances.

Net of debt repayments, the DOF said state borrowings in the first four months amounted to P873 billion.

Dominguez said that raising the country’s borrowings is crucial to enable the Duterte administration to carry out initiatives that would help the country cope with unexpected shocks due to the COVID-19 pandemic, and before that, the Taal Volcano eruption.

“The government has had to increase spending to implement its four-pillar socioeconomic strategy against COVID-19 even as strict mobility restrictions that national and local governments imposed since March to suppress the coronavirus’ spread had curtailed economic activity and led to a sizeable drop in the state’s revenue intake,” Dominguez said.

Despite higher borrowings, the finance chief maintained that the government must spend prudently to prepare for the extended impact of pandemic.

He said any stimulus plan to address the pandemic must also be anchored on fiscal prudence and sustainability.

“None of us knows how long this pandemic will last. As we have borrowed a lot–P1.22 trillion in just four months, to be exact–fiscal space should be saved to afford us elbow room in case future circumstances require a new round of big healthcare spending, subsidies and/or stimulus programs,” Dominguez said.

“Loans are not free money. They are advances that we, or even our children and their children, will have to pay for in some way in the future. The Duterte administration’s policy is to be careful not to borrow beyond sustainable levels, lest we fall into a vicious cycle of accumulating unmanageable debt, which might drastically increase our financing costs, and plunge us deeper into debt.