The Bangko Sentral ng Pilipinas (BSP) has given provisional authority for the planned foreign borrowing of the National Government in the first quarter of 2009.
BSP Governor Amando M. Tetangco Jr. told reporters that the Monetary Board has approved foreign borrowings of unspecified amount at its last meeting before the holiday break.
According to Tetangco, the borrowing authority was approved to give the National Government the room to undertake its plan to raise funds from the foreign market.
“They both need and want to be opportunistic so this just allows them to do just that,” Tetangco said.
With the country’s dollar reserve shrinking, however, the National Government is expected to reconsider its borrowing mix for 2009 which the Department of Finance set at 74-percent domestic to 26-percent foreign.
The DOF said it was following the same mix as 2008, with its budget deficit projected to swell to as high as P60 billion from P40 billion previously.
The 2009 borrowing program would require the government to raise P437.1 billion from domestic and foreign creditors although there would be a 3.4-percent decline in domestic borrowing to P321.4 billion from P332.7 billion in 2008.
Foreign borrowing, on the other hand, is projected to increase to P115.6 billion from P105.9 billion in 2008.
The BSP reported earlier that the country’s outstanding foreign debt dropped $1.3 billion at the end of the third quarter in 2008, recorded by the central bank at $53.5 billion from $54.8 billion at the end of June.
The BSP tracks external debt which refer to all types of borrowings of Philippine residents owed to non-residents that were approved and/or registered by the central bank.
Based on the latest data, the BSP said there are improvements in the major external debt ratios due mainly to the overall drop in the total external debt stock.
“The decline in external debt stock was also accompanied by a continuing improvement in the country’s external debt related ratios,” Tetangco said.
First, Tetangco said the external debt ratio, or total outstanding debt as a percentage of the country’s Gross National Product (GNP ), declined to 28.9 percent, from 36.8 percent in September 2007 and 35 percent in December 2007.
In terms of gross domestic product (GDP), Tetangco said the external debt ratio also improved to 31.8 percent, from 40.2 percent in September 2007 and 38.1 percent in December 2007.
Since 2002, the BSP said the ratio has generally traced a downward trend, indicating a sustained improvement in the country’s capacity to service its maturing foreign obligations.
According to the BSP, the external debt service ratio (DSR) was estimated at 10.1 percent during the period January to September 2008, lower than the 10.5 percent recorded during the same period last year.
This ratio represents the percentage of total principal and interest payments to total exports of goods and receipts from services and income (which include remittances of overseas Filipino workers).
The BSP reported that the DSR has remained well below the 20 to 25 percent international benchmark, indicating that the country has sufficient foreign exchange earnings to service maturing principal and interest payments during the current period.
Year-on-year, the debt stock declined by $945 million also as a result of net principal repayments which reached $3.3 billion.
The BSP said these repayments were partially offset by the upward foreign exchange revaluation adjustments ($1.5 billion), mainly reflecting the increase in the dollar equivalent of loans denominated in Japanese yen.
The BSP said there is also an increase in the holdings of Philippine debt papers by non-residents ($442 million); and the upward audit adjustments ($404 million).
Prepayments on external debt accounts during the 12-month period ending September 2008 totaled $1.8 billion. Major portions of these prepayments were made by the Napocor, private commercial banks for their Tier 2 capital issues and other major private borrowers across various sectors.–Des Ferriols, Philippine Star
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