The Monetary Board, the Bangko Sentral ng Pilipinas policy-making arm, has approved the additional debt, which will be availed of "as the need arises," officials said. Monetary authorities approve all government borrowings.

Proposals to adjust the borrowing mix in favor of more domestic sourcing are now being taken up by the executive technical board of the Development Budget Coordination Committee upon the suggestion of the BSP. Domestic borrowing lowers the foreign exchange risk.

The approved 2006 borrowing program is 58:42 in favor of domestic. In the past, while on paper the ratio is 60:40, actual borrowing mix is 70:30.

At the moment, according to the Department of Finance, domestic loans as of end-December 2005 totalled P2.134 trillion.

For the year, the total foreign borrowing program is billion, and 0 million are official development assistance or ODA loans. Last January the NG issued .1 billion to fund the country’s dollar requirements – mainly for interest payments.

The NG foreign borrowings hike up reserve assets or gross international reserves with the BSP. Presently the GIR is at its highest at billion. Both the NG and BSP dip into the dollar reserves for debt service requirements.

In the meantime the DoF insists on domestic market sourcing because they believe the market remains liquid on low demand from the corporate side.

Failing to raise enough revenues, NG had to rely on borrowings to finance its annual requirement. However with the new value added tax law implemented, government tax effort is expected to improve and there will be less pressure to borrow abroad to fund the budget deficit.

The government needs dollars to pay for its maturing obligations and despite the DoF’s "snobbery" of foreign borrowings, analysts said the state always ends up revising the borrowing profile anyway because of their need for the dollars

BSP Governor Amando M. Tetangco Jr. said earlier that the country has a healthy dollar stock, which means monetary authorities could cushion the effects of volatility in the financial markets.

The BSP maintains that current GIR figure is at comfortable levels. In short, the country’s GIR level is enough to meet requirements for short-term obligations. This also means there are no shortage of dollars. Majority of government debt servicing is dollar-denominated.

One of the dollar sources is the overseas Filipino workers’ remittance, which contribute to GIR and are basis for improving the country’s balance of payments level. Steady income flows, largely remittances from OFW, coupled with the lower deficits also contribute to improve capital and current accounts.