GOVT  URGED  TO  SOURCE  40%  OF  FUNDING  NEEDS  FROM  ABROAD

MANILA, September 24, 2004 (STAR) By Des Ferriols - The government should increase its foreign borrowing in 2005 to at least 40 percent of its total borrowing program, instead of its 22-78 borrowing mix planned for 2005.

Preliminary estimates made by the Bangko Sentral ng Pilipinas (BSP) indicated that the ideal borrowing mix was closer to 40-60 to 45-55 where 40 percent to 45 percent of total borrowing should come from the foreign credit market.

The BSP said that its preliminary estimates were based on the maturing obligations of the National Government in 2005 that were denominated in foreign currency.

BSP Assistant Governor Diwa G. Guinigundo told reporters yesterday that the ideal borrowing policy should match the government’s foreign maturing currency-denominated loans with the amount that it would borrow for 2005.

The Department of Finance (DOF) in its report to Congress said that there would be no drastic shift in its borrowing mix for 2005 from this year’s 20-80 ratio.

The DOF said its financing program for 2005 would require the NG to raise at least P214 billion in net financing, down from P228.6 billion in 2004 and P286.8 billion in 2003.

The DOF said that 22 percent of this amount would be raised from the foreign credit market while 78 percent would come from domestic borrowing.

Both the DOF and BSP estimates do not include the loans of the National Power Corp. (NPC), of which P560 billion would be absorbed by the government.

According to Guinigundo, however, the 2005 borrowing mix was still a moving target although he said the national government should look at its forex-denominated maturities.

"Based on our preliminary estimates of maturing forex-denominated obligations, it would appear that the ideal borrowing mix should be at 40-60 percent to 45-55 percent," Guinigundo said.

The DOF’s 2005 borrowing mix was a slight adjustment from the 80-20 mix in 2004 where the bulk came from domestic borrowing through heavy issuance of Treasury bills, Treasury bonds and at some point, even cash management bills.

This year, the BSP warned that the NG’s borrowing program would lead to a $2-billion foreign exchange shortfall.

The government has recently completed its foreign borrowing program including the requirements of the Napocor.

DBCC papers indicated that the NG had a total funding gap of about $1.6 to $2 billion that was not covered by the borrowing program.

For 2005, the picture could still change when the NG finally books the Napocor debt that it planned to assume, estimated to be over P560 billion.


Reported by: Sol Jose Vanzi

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