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LOAN prepayments made by the government and the private sector
dropped last year despite the peso’s strength vis-à-vis the
dollar, the Bangko Sentral ng Pilipinas (BSP) said.
BSP Governor Amando M. Tetangco Jr. said total
prepayments reached $2.995 billion in 2007 from $3.66 billion the
year before. The government prepaid $1.12 billion, while the private
sector retired $1.875-billion of its obligations.
Of the public prepayments, the BSP accounted for
$0.805 billion while the national government settled $0.126 billion
of its debt.
The Department of Finance is planning to prepay
another $2.4 billion of the country’s debt by tapping government
owned and controlled corporations (GOCCs).
Finance Undersecretary Roberty B. Tan said the
government also plans to buy dollars from the local market for debt
servicing this year.
“We’ll buy some foreign currency to settle
maturing obligations,” he said.
Recent data from the finance department showed
that the $2.4 billion represents seven percent of the combined
P1.382 trillion that GOCCs owed creditors as of March last year.
GOCCs recorded a combined surplus of P39.86 billion in the first
nine months last year.
BSP Deputy Governor Diwa C. Guinigundo, however,
said the finance department’s plan would hardly put a dent on the
local currency’s record rise, as that amount is only good for two
days’ worth of trade.
“Let’s say we’ll divide it by $200 million
every day, it will hardly make a change. But it will still help
because that’s $2.4 billion [that] will not have to be sold in the
domestic markets, or $2.4 billion that would have been sourced from
outside then brought in,” Guinigundo said.
He had said the finance department however has
yet to inform the central bank about any plan to buy dollars.
Assuming the finance department decides to
source the $2.4 billion from the central bank, Guinigundo said it
would not be made in one transaction.
The local currency has been appreciating since
last year, helped by strong dollar inflows and a weak US currency,
as the Federal Reserve, the BSP’s counterpart, kept cutting its
key funds rate to prevent the world’s largest economy from sliding
into a recession. A recession would pull down Philippine exports, as
the US is its biggest market abroad.
The BSP has also been slashing its overnight
rates in lock step with the Fed’s reduction to maintain the
difference between Philippine and US interest rates. Failure to keep
this rate differential stable would cause dollar flows to surge into
the Philippines, thus triggering inflationary pressures.
-- Chino S. Leyco
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