Less dependence on foreign debt bared in planned 2016 state borrowing mix

THE NATIONAL GOVERNMENT plans to further reduce its foreign debt exposure next year in line with its goal of shielding the Philippine economy from external shocks, National Treasurer Roberto B. Tan said last week.

Mr. Tan said the Bureau of the Treasury is looking at an 86-14 borrowing mix in 2016 in favor of the domestic market from the 84-16 ratio this year.

“With some uncertainty with the volatility of the interest rates in the foreign exchange market, as well as capital flows, we’d like to minimize our foreign exchange risk,” Mr. Tan said at the sidelines of a congressional hearing last week.

Last year, the government programmed an 83-17 financing mix in favor of the domestic market. The ratio was tweaked from 87-13 originally to reflect unscheduled offshore borrowings to bankroll post-disaster reconstruction efforts.

The government is working to raise the domestic component of its debt portfolio as part of efforts to reduce the country’s exposure to external shocks, and is also closely watching foreign fund inflows due to their impact on the country’s currency.

The national government’s outstanding debt stood at P5.79 trillion in the four months to April, up 2.7% year on year from P5.640 trillion. The total slightly rose 0.1% from the P5.787 trillion recorded at end-March.

Domestic loans now account for 68% of the national government’s total debt portfolio, in line with the government’s goal to

shield the local economy from international financial volatilities.

In the same four months, domestic debt totaled some P3.851 trillion, up 4.5% from P3.686 trillion last year, while external debt declined 0.7% annually to P1.934 trillion but rose 0.4% from March.

The government borrows from both domestic and external markets to fund its fiscal deficit, which settled at P73.09 billion in 2014, equivalent to 0.6% of gross domestic product and below the P266.2- billion cap for the year. The national government posted a P33.52- billion budget gap in January-March, down 60% yearon-year and 66% below the P98.1 billion cap for the first quarter.