MANILA, OCTOBER 27, 2003  (BULLETIN) By Fil C. Sionil - The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has already approved in principle the $1 billion proposed foreign borrowings of the national government scheduled later this year.

This as BSP Governor Rafael Carlos B. Buenaventura disclosed his plan to defer any borrowing activities next year to raise the remaining $500 million requirement of the BSP to refinance maturing obligations in 2004 should export performance fall within the ten percent target.

“My plan is to borrow by the second half of the year, shortly after election. Although, we may not even borrow if export performance is good. Our requirement is least of the problem,” Buenaventura said.

Preferred tenor for the BSP borrowing, should the BSP Chief changes his mind, is five years to “stretch out” the maturities and prevent the bunching-up of maturities, which could exert upward pressure on the peso.

Some $830 million of BSP obligations will fall due next year. However, the BSP will only have to borrow $500 million since it has about $385 million extra from the recent $500 million facility it inked early this month with a syndicate of banks.

Buenaventura supported the plan of the fiscal managers to do another pre-funding later this quarter to satisfy the government’s $1.8 billion financing needs for the coming inorder to save on the cost.

“That is a good idea. I hope they can borrow before when rates are still at reasonable levels,” Buenaventura said.

International market analysts foresee US interest rates to go up next year, a situation that could bring additional borrowing cost to the Philippine government.

Also, the scheduled presidential poll in May next year will weigh on the borrowing cost of the republic since foreign investors normally demand higher spreads over benchmark US treasuries on sovereign debt issues of governments whose leadership is uncertain.

The government has already raise early this month $1.05 billion from the international market through the reopening of its existing global bonds issued in July. Of the new money raised, $250 million has been appropriated for this year while the balance of $800 million forms part of the pre-funding requirement for 2004.

Should the government pursue its plan to tap once again the international financial market for another $1 billion, its $1.8 billion borrowing requirement for 2004 to finance a deficit of P198.7 billion has already been satisfied.

However, it is uncertain whether all of the money to be borrowed forms part of the funding needs in 2004 or a portion of it will be relent to cash-strapped National Power Corporation (Napocor).

Reported by: Sol Jose Vanzi

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