Gov’t borrowings inch up to P2.19 T

The Philippines slightly increased its borrowings to P2.19 trillion last year amid a high interest rate environment here and abroad, with the government almost hitting its entire financing program.

Latest data from the Bureau of the Treasury showed total borrowings in 2023 inched up by 1.38 percent from P2.16 trillion in obligations in 2022.

By end-2023, the government had used up 99.2 percent of the P2.21-trillion borrowing plan it crafted for last year.

It should be noted that interest rates remained high last year as inflation sizzled, both on the global and domestic front.

The Bangko Sentral ng Pilipinas (BSP) even took an off-cycle rate hike in October that brought the benchmark interest rate to a 16-year high of 6.5 percent.

A high interest rate environment simply means that borrowing is more costly for the Philippines.

For now, the biggest market lead is the continued expectation that the US Federal Reserve will cut rates by as much as 150 basis points this year, with the first move likely by May. Such a move could be matched locally as inflation moves closer to the BSP target of two to four percent.

This year, the borrowing program has been set at P2.46 trillion, 12.3 percent higher than the 2023 level, but still adopting a 75:25 borrowing mix in favor of domestic sources.

This strategy aims to mitigate foreign exchange risks, take advantage of liquidity in the country’s financial system, and support the development of the local debt and capital markets.

Meanwhile, bulk of the total borrowings last year at 75 percent worth P1.63 trillion were from local lenders. This was just less than a percentage below the P1.64 trillion in 2022.

Broken down, P1.18 trillion was secured through fixed-rate Treasury bonds.

Another P252.09 billion was borrowed via retail Treasury bonds following the issuance in February last year, while P71.78 billion was raised through retail dollar bonds in October.

At the same time, the government borrowed P119.53 billion in T-bills, while the maiden issuance of tokenized bonds yielded P15 billion.

The remaining 25 percent or P559.04 billion was borrowed from foreign sources. External debts increased by 7.5 percent from P520.09 billion.

Roughly 36 percent of the entire external financing at P204.28 billion was sourced from multilateral institutions via program loans and another P135.86 billion was made up of project loans.

The government also borrowed through global bond issuance in January worth P163.61 billion, while the maiden Sukuk bond in December resulted in P55.29 billion in Islamic certificates.