Gov’t cuts offshore borrowings in 2018

Prefers more concessional loans

The national government hiked its programmed concessional loans for next year while reducing by more than half its planned borrowings from the overseas debt markets, data from the Bureau of the Treasury showed.

Based on the Treasury data, the government is planning to borrow $3.45 billion from the offshore markets through project loans, program loans and global bonds in 2018, lower by 5.4 percent compared with the programmed $3.65 billion this year.

Of the total foreign financing, the national government plans to raise $1.65 billion through program loans, an increase of 94 percent compared with $849.4 billion this year.

Likewise, the government raised its project loans for next year by 32 percent to $805 million from R606 million.

On the other hand, the government reduced its commercial borrowings by 54.5 percent to $1 billion from the planned $2.2 billion this year. For 2018, borrowing from both domestic and foreign sources was expected to reach a total R888 billion, documents from the treasury showed, an increase of 22 percent from this year.

Manila raised $500 million from a new 25-year US dollar bond offering in January, which was the tightest-priced long-dated global bond issued by the Philippines – one of Asia's most active sovereign bond issuers.

The Philippines' improved fiscal position and debt management programs have impressed global credit rating agencies.

Moody's and Standard & Poor's both rate the country two notches above investment grade. The government also plans to fund the increase in next year's spending plan via $2.45 billion of project and program loans, the documents showed.

President Rodrigo Duterte has asked Congress to approve his proposed R3.77trillion budget for next year, a 12.4 percent increase on this year's R3.35-trillion budget, as he aims to spend heavily on infrastructure to keep growth robust.

His government is pinning its growth targets on infrastructure projects to create jobs, stimulate the economy and attract foreign investors who have been put off by high power prices and transport bottlenecks that eat into profits.

Duterte's 2018 budget assumes a deficit of R523.6 billion, or 3.0 percent of gross domestic product.

The firebrand leader has asked lawmakers to prioritize a tax reform bill, which seeks to tax sugar-sweetened drinks and raise excise taxes on fuel among other things, to ensure he can fund new airports, ports, roads and railways.

Infrastructure spending is expected to rise to 7.4 percent of GDP by 2022 from 5.4 percent of GDP this year.

The Philippines received a record $7.93 billion in net foreign direct investment last year, but that figure pales in comparison with regional peers, such as Malaysia’s $12.6 billion and Singapore’s $61.6 billion. (With Reuters report)