Gov’t raises borrowing cap for 2018

Bulk from local sources

State borrowings will 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 Bureau of 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 three-fifths in the first four-months alone.

As of April, the Treasury data showed the government’s gross borrowings reached R419.6 billion, accounting for 66.46 percent of the original ceiling and 74.1 percent higher compared with R241 billion a year earlier.

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 gross domestic product (GDP). In nominal terms, the fiscal gap amounts to R523.59 billion, higher by 8.6 percent from R481.91 billion this year.

The detailed breakdown of next year’s borrowing program, which includes fixed-rate Treasury bonds, shorter-termed IOUs, official development assistance, and commercial borrowings, has yet been finalized by the Treasury.

The Duterte administration plans to submit 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.