March govt debt raised by Yolanda rehab cost


OUTSTANDING government debt expanded by 6.6 percent in March from the year-earlier level as the government continued to rely on borrowing to fund its Yolanda rehabilitation and reconstruction efforts.

Data from the Bureau of Treasury showed that the government’s outstanding debt stood at P5.63 trillion as of end-March, up P346.95 billion from the P5.28 trillion recorded a year earlier.

Month-on-month, the increase in outstanding government debt in March was smaller at only 0.66 percent, or P37 billion, from P5.60 trillion in February 2014.

Of the total debt, P3.66 trillion or 65 percent was sourced to domestic creditors while P1.97 trillion, or 35 percent, was sourced to foreign creditors, according to the data.

The government opted to borrow more from domestic creditors to avoid currency risk that could lead to higher repayment of foreign currency denominated debt.

The domestic component of the outstanding debt increased by 0.49 percent, adding P18 billion to the end-February 2014 level on the back of net issuances and foreign exchange adjustments.

The Philippines also incurred foreign borrowings during the month, consisting of US dollar bonds and notes, Japanese yen bonds, euro bonds and peso-denominated bonds – using a foreign exchange rate of P44.90 to a dollar.

Foreign debt went up by 0.97 percent, or P19 billion from the previous month’s level.

Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, said the higher domestic debt in March indicated the government borrowed funds to prepare for the continued outflow of investment funds from the Philippines, lured away by the United States Federal Reserve’s tapering of its bond-buying program and its eventual interest rate hike cycle.

“As such, the peso is seen having a higher probability to depreciate rather than appreciate against the dollar, and in response, the national government opted to source its funding onshore,” Mapa said.

He added that by borrowing more from the domestic market, the government avoided the currency risk associated with foreign debt at a marginal higher interest rate.

Earlier, the government said that it would borrow more from domestic creditors rather than from foreign sources to prevent the higher repayment of foreign debt because of a weaker currency.

“With domestic interest rates still relatively low compared with the recent past, borrowing onshore made sense rather than to borrow from abroad and be exposed to currency fluctuations,” Mapa added.

Meanwhile, the Philippine Treasury said that total government guaranteed debt amounted to P471 billion, which is 0.63 percent or P3 billion lower on a month-on-month basis.

“This is primarily due to the reduction in external guaranteed obligations—a product of net repayments and currency adjustments,” it said.

Domestic guaranteed obligations remained unchanged over the period. Year-on-year, total guaranteed obligations dropped by 1.88 percent, equivalent to P9 billion.


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