(STAR) By Rocel C. Felix - The government was able to contain foreign borrowing within its prescribed debt ceiling with about $4 billion in unutilized credit.

Last month, the National Government (NG) said it completed its foreign commercial borrowings for this year at $2.85 billion which is lower than program by $150 million. Moreover, there is no pending application for more borrowing with the Bangko Sentral ng Pilipinas (BSP) or to tap the balance of $4 billion.

The NG has set an internal annual debt ceiling to monitor foreign borrowings, either from commercial sources or from official development assistance (ODA) funds. Data show that of the $4 billion unused foreign borrowings, $3 billion are public sector borrowings.

Analysts said the unused borrowing indicates the country has built up strong dollar reserves while maintaining a healthy balance of payments surplus.

Since July, the country’s gross international reserves (GIR) was nearing the $22 billion level while the BOP surplus was more than $2 billion year-on-year.

The NG borrows in foreign currencies to pay for interest payments, trim the budget gap along with BOP deficits.

For close to 20 years up to the early 1990s the International Monetary Fund (IMF) imposed a debt ceiling for the NG to rein in the growing external debt. After the IMF program expired, the government decided to keep this debt ceiling for better management of its foreign debt.

Under Republic Act 4860, the government is mandated to allocate a debt ceiling of $10 billion a year for its foreign borrowing.

As of March this year, the country’s external debt hit $55.3 billion, up 2.1 percent from $54.2 billion during the same period in 2005. The BSP earlier said the country’s external debt ratio to gross domestic product went down to 53.9 percent from 62 percent in 2005.

On the other hand, the ratio or total outstanding external debt as a percentage to gross national product was about 49.7 percent last March, an improvement from the 50.8 percent from the last quarter and 57.5 percent a year ago.

The BSP attributed the increase in the debt level during the quarter to net foreign borrowings of $1.4 billion, and upward foreign exchange revaluation and other adjustments at the end of the quarter of $266 million. These were partially offset by increased residents investments in Philippine debt papers issued abroad of $513 million, which trimmed the stock of debt owed to non-residents.

The NG frontloaded its borrowings for the said quarter, increasing the share of public sector accounts to total outstanding external debt which rose by 0.88 percentage point during the quarter to reach 68.2 percent.

Official lenders such as multilateral and bilateral institutions comprised 38.9 percent of total debt, foreign holders of bonds and notes at 33.9 percent, and foreign banks and other financial institutions, 21.8 percent, and 5.4 percent were suppliers.

Chief News Editor: Sol Jose Vanzi

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