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By Likha C. Cuevas-Miel, Reporter
AMID rising interest rates in the domestic
market, the Philippines may opt to raise funds abroad, the
Department of Finance said Monday.
On the sidelines of the San Miguel Brewery Inc.
listing ceremony, Finance Sec. Margarito Teves told reporters the
government may shift its borrowing mix from the current program of
75:25 percent in favor of local sources, to a 65:35 ratio.
“We will also consider that [borrowing more
abroad]. At the time when we were working on a larger share of the
domestic borrowing vis-a-vis foreign borrowing, the circumstances
were quite different from what they are today. That’s the reason
we’ve always indicated that depending on market opportunities,
depending on circumstance[s], we would look [at] the ratio
pragmatically,” he said.
Teves said the shift may depend on “the
changes that are taking place” and whether these will be permanent
for this year until 2009. “But if the changes are just going to be
temporary, we have to check how the adjustments would take place.”
When the government embarked on a budget deficit
reduction program, it initially set the borrowing program at 65:35
percent in favor of local sources before reducing the foreign
component by 5 percentage points. However, interest rates have since
risen, while the peso began weakening vis-à-vis the dollar.
The Development and Budget Coordinating
Committee (DBCC) will revise the country’s gross domestic product
(GDP) growth goal this year to between 6 percent and 6.7 percent
from the original 6.3-percent to 7-percent target range. The
inter-agency body will also revise its inflation assumption to a
range of 4 percent to 5 percent from the original target of 3
percent to 4 percent.
As the DBCC realigns its inflation target, the
91-day Treasury bill rate is seen to average 3.5 percent.
Economic managers also would expect Dubai crude,
the Philippines’ benchmark for the commodity, to cost an average
$88 a barrel this year from the original assumption of $62 a barrel.
The DBCC also assumed that the peso would average between 40 and 43
to the dollar this year, as imports and exports would grow 8 percent
and 9 percent, respectively.
The nature of government borrowing may depend on
how quickly it can work on the disbursement of the official
development assistance, spending of which usually takes longer than
commercial loans. “There are also program loans that are close to
[being] available because we have been discussing these,” Teves
said.
If given the chance, the finance department
would tap the debt markets as a last resort and only if tax revenues
fail to support priority expenditures on social services,
infrastructure and food.
At Monday’s auction of one-year Treasury
bonds, banks sought higher yields for parting with their money on
the back of soaring commodity prices.
The government accepted lenders’ bids for the
debt papers at 6.915 percent, or higher than the previous
auction’s rate of 5.993 percent.
With the higher yield, the government secured
only P1.971 billion, significantly lower than its planned P6-billion
borrowing.
“It is really inflation expectations that
[have] driven this,” Finance Undersecretary Roberto Tan, who also
serves as the national treasurer, told reporters after the auction.
The National Statistics Office earlier said
prices of goods and services rose at their fastest pace in three
years, accelerating to 8.3 percent last month from 6.4 percent in
March. The April inflation rate overshot the Bangko Sentral ng
Pilipinas’ (BSP) forecast of between 6.4 percent and 7 percent.
As a result, the BSP admitted that inflation may
breach this year’s target of between 3 percent and 5 percent. In
the first four months alone, the average 6.2-percent price increase
already shot past the high-end of the full-year target.
-- With Chino S. Leyco
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