MANILA, November 2, 2005
 (STAR) By Rocel C. Felix - The Department of Finance (DOF) has no plans of pre-funding government’s 2006 financial requirements despite completing this year’s funding needs ahead of schedule.

"There is no plan to negotiate for a pre-fund at the moment," Finance Undersecretary Roberto Tan said.

The government already completed its financing requirements this year with the successful conclusion of its land bond sale in September worth $1 billon which was oversubscribed by 7.5 times.

The excess $150 million will be used to pre-fund next year’s financing requirements.

Tan said the DOF is still assessing when to return to the international financial markets and begin pre-funding its 2006 borrowings.

DOF officials have been saying earlier that they are not inclined to pre-fund its 2006 financing requirements because they would rather not borrow or pay interest for borrowings not yet maturing.

For 2006, the National Government’s financing requirements is pegged at $4 billion, broken down as $3.1 billion commercial borrowings and about $900 million from official development assistance or ODA funds.

On the other hand, its maturing obligations for next year is at $5 billion, with principals of $2 billion.

Money supply up 14.8% to P2.24T in September By Rocel C. Felix The Philippine Star 11/02/2005

The Bangko Sentral ng Pilipinas (BSP) said domestic liquidity or M3 rose 14.8 percent to P2.241 trillion in September.

BSP Governor Amando Tetangco Jr. attributed the sustained expansion in liquidity to the rise in net foreign assets of depository corporations, which in turn, was spurred by strong remittances from overseas Filipino workers (OFWs)‚ capital inflows and portfolio investments.

Tetangco added that deposit money banks’ net foreign assets also increased year on year by 10 percent in September while net international reserves of the BSP improved with the increase in its foreign assets along with the decline in foreign liabilities.

Further contributing to the expansion in domestic liquidity is the moderate growth in credits to both the public and private sectors.

Tetangco noted that in September, public sector credits grew by 4.9 percent due to the strong demand for government securities issued by the National Government and the increase in loans availed by local government units.

Securities issued by the National Government grew 7.3 percent while credits to local governments increased by 8.6 percent. On the other hand, private sector credits expanded by 3.5 percent.

For the third quarter this year, the BSP said ample liquidity in the financial system continued to drive investible funds into the government securities market as the primary market continued to attract an excess of bids.

The total oversubscriptions for the quarter was P80.7 billion while Treasury Bill auctions for the period yielded a total of P157.7 billion tenders against a total offering of P77 billion.

The BSP chief said monetary officials are closely watching domestic liquidity, especially after exceeding BSP comfort levels of 13 percent. In July and August M3 grew more than 15 percent. Excess liquidity could be generated by the continuing inflows of capital, services and merchandise trade.

The Monetary Board (MB) of the BSP already raised its key policy rates thrice this year to temper inflationary pressures arising from the continued surge in prices of oil in the world market and the strong growth in domestic liquidity. The MB noted that the recent growth in money supply may not be necessarily channeled into consumption and investment spending, given that growth in bank lending has remained moderate and aggregate demand is slowing down. Moreover, the MB said that the trend of rising foreign interest rates due to monetary tightening of other central banks could lead to further declines in interest rate differentials.

"Combined with excess liquidity in the financial system, a shift toward dollar assets, resulting from declining interest rate differentials could lead to volatility in the peso dollar exchange rate, which in turn could raise inflation and inflation expectations," said Tetangco.

Tetangco said previously that the country’s inflation rate should slow down to six to seven percent for the remaining months of the year, despite increase in world oil prices and the impact of the expanded value added tax (EVAT).

Chief News Editor: Sol Jose Vanzi

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