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BSP caps 2014 foreign borrowing

The Bangko Sentral ng Pilipinas (BSP) is limiting the country’s foreign borrowing this year at $5 billion to ensure size of external debt stays within manageable levels.

This is the second consecutive year that the central bank has capped foreign loans ceiling at this level. In 2012 the borrowing cap was at $8.5 billion, in 2011 it was higher at $10 billion and the highest was $12 billion in 2010.

The limit covers both the government or public sector and the corporate or private sector foreign borrowing.

Sources said the Monetary Board – BSP’s policy-making arm – has approved to keep the $5-billion ceiling for 2014.

The report to the Monetary Board indicated that the 2014 ceiling is still consistent with maintaining “healthy external debt ratios” and ensuring sustainability of the country’s debt management program.

The BSP also noted that public and private sector’s foreign borrowing plans seem to still favor sourcing their financing requirements from the domestic market despite the sovereign’s improved investment grade status.

Late last week the government raised $1.5 billion from the international bonds market. For the rest of the year, both the government and corporate sectors have indicated intentions to source funding locally.

The central bank, which regularly reviews the effectiveness of imposing annual ceilings on foreign loans and its impact on controlling the size of Philippine debt, implemented higher limits in 2010 and 2011 as there was a need at that time for more foreign currency denominated loans to finance the government’s public-private partnership (PPP) program at the time.

The Monetary Board has given banks and financial institutions until December 2016 a separate single borrower’s limit of 25 percent of the net worth of the lending bank to corporations undertaking PPP-eligible projects in a bid to open a wider venue of funding sources for the private sector.

Of the $5 billion borrowing cap, while the public sector has the bigger share of the allowable external loans, any amount unutilized by the government would be made available for use by private corporations.

The BSP has an ongoing review of its foreign borrowing policy in the context of its ceilings on medium and long-term loans. After a board resolution in 2011, the BSP assessed the effectiveness of implementing a ceiling on the foreign loans of both the public and private sectors.

As of end-September 2013, the Philippines’ total outstanding external debt amounted to $59.1 billion, 4.3 percent lower than end-September 2012’s $61.7 billion. By BSP definition, external debt refers to all types of borrowings by Philippine residents from non-residents that are approved/registered by the BSP.