Gov’t borrowed less in July

Government financing fell by more than half in July this year after borrowings from offshore and local lenders decreased during the month, data from the Bureau of the Treasury showed.

The Treasury reported that the gross borrowings of the national government stood at R14.21 billion in July, lower by 52 percent compared with R29.54 billion in the same month last year.

Of the total financing, domestic accounted for 91.69 percent amounting to R13.03 billion, but the figure was lower by 53.5 percent against R28.05 billion in the previous year.

On the other hand, foreign borrowing reached R1.81 billion, or 8.31 percent of the total, but it is also slimmer by 34 percent compared with R1.79 billion in the same month in 2016.

The national government needs financing support from local and foreign banks to fund the Duterte administration’s projects and programs as well as bridge the expected budget deficit this year equivalent to 3.0 percent of the country’s gross domestic product (GDP).

For 2017, the national government is poised to borrow lower than last year at R727.64 billion, according to the Department of Budget and Management (DBM) data.

In the first seven-months of the year, the Treasury reported that total gross financing grew by 55 percent to R519.97 billion from R334.02 billion in the same period last year.

Of that amount, local borrowing jumped to R379.58 billion, or by 89 percent compared with R198.56 billion last year, while external financing increased by 36 percent year-on-year to R140.39 billion from R135.64 billion.

For 2018, state borrowing is expected to increase by over a fifth next year while those sourced from abroad are expected to decline as the Duterte administration keeps its bias for domestic creditors.

Data from the Treasury showed the Duterte administration plans to borrow R889.72 billion next year, or 22.3 percent more compared with this year’s R727.64 billion revised ceiling.

The government originally programmed a R631.3-billion financing cap in 2017.

However, the inter-agency Development Budget Coordination Committee (DBCC) revised the plan after utilization rate reached above threefifths in the first four-months alone.

Based on the 2018 financing program approved by the economic managers, about 80 percent of government’s borrowings will be raised from the domestic market amounting to R711.77 billion, 31 percent higher than this year’s R540.14 billion.

The government also intends to borrow a fifth, or R177.94 billion, of its financing requirements from foreign sources, but it is lower by five percent compared with R187.5 billion ceiling set for this year.

For 2017, the Duterte administration slightly adjusted its financing mix from 80:20 to 79:21, but still with a bias for local sources.

The DBCC-approved financing program is anchored on a budget deficit equivalent to 3.0 percent of GDP. In nominal terms, the fiscal gap amounts to R523.59 billion, higher by 8.6 percent from R481.91 billion this year.

The Duterte administration submitted to Congress a R3.767-trillion proposed national budget for 2018, a slight adjustment from the original plan of R3.840 trillion.

Budget Secretary Benjamin E. Diokno earlier said the downward revision in the nation’s budget was owing to the watered-down tax reform package one approved by the House of Representatives.

From the original R174.2 billion projected revenue from the tax reform, the House-approved comprehensive tax reform package one bill would generate only R133.8 billion in additional state income.

Despite the lowered revenue estimate, the DBCC, which sets the country's macroeconomic goals and assumptions, maintained its GDP growth targets of 6.5 percent 7.5 percent this year and 7.0 percent to 8.0 percent from 2018 to 2022.

The budget deficit program of 3.0 percent of GDP was also maintained throughout the Duterte administration.