The National Government has interest obligations of P339.7 billion this year, higher compared to the 2005 programmed interest payments of P313.4 billion.
The emerging numbers for 2005 is in fact lower at P306.3 billion, Department of Finance documents show, because of lower interest rates versus assumptions.
For the current year interest payments, Finance Undersecretary Roberto Tan said domestic obligations would require P215.5 billion and P124.24 billion for external dues. The foreign principal amortization for 2006 is P119.07 billion.
‘We have to determine what will be maturing this year," Tan told reporters.
Finance Secretary Margarito B. Teves said the borrowing policy is more domestic sourcing, less foreign currency to reduce costs, risks and to optimize dollar inflows from assistance funds. This is a ratio of 42:58 in favor of domestic borrowings compared to last year’s 65:35.
"Again we need to review our borrowing profile to minimize risks and reduce costs to our interests. Foreign borrowing, which is dollar currency is much too risky," Teves added. Last week the state issued ROPs or Philippine bonds worth .1 billion in US dollar and EURO.
Teves said interest payments consume over a third of revenues and the government budget, the highest in the Asian region. "This leaves us vulnerable to potential shocks from currency depreciations, interest rate hikes, inflationary pressures and unexpected events," he stressed.
To improve the government liability portfolio, the DoF chief emphasized the need to explore financing structures that reduce borrowing costs such as optimizing ODA financing, lengthening the debt maturity profile and diversifying the currency mix.
Adjusting the maturity structure is a debt relief proposal. All these aimed at reducing National Government debt to 70 percent of GDP from 80.4 percent in 2004. "Reducing our debt to GDP ratio should be a primary concern if we want to maintain sound macroeconomic fundamentals, strengthen our competitiveness and improve our budget structure," said Teves.
At the moment, the NG borrows more in US dollar, which is 50 percent of the borrowing mix, while 30 percent are in yen and the balance are borrowings in euros.
The government has programmed loans of billion this year from foreign funding sources and some P272 billion from the domestic market. This is about the same level of financing requirement of NG last year.
In the meantime the NG, in its current review of its borrowing strategy for 2006, is not expecting a deluge of aid fund or official development assistance. This is because a lot of ODAs are dependent on fiscal numbers and will only release the funds when the budget deficit falls below three percent of gross domestic product. At the moment the deficit is about 3.5 percent of GDP.
Since the ODAs are not as big as programmed before the government relies more on commercial borrowing.
"But we want to explore more domestic funding and for our dollars, better management of ODAs," said Teves.
Presently ODA utilization is very poor and the DoF and the Department of Budget and Management are rationalizing the country’s development financing profile. (LCC)
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