Government financial institution Land Bank of the Philippines has withdrawn its request to the Department of Finance (DoF) to reduce its foreign exchange (FX) risk cover from three to two percent.

Land Bank president and CEO Gilda E. Pico said the National Government needs all the cash it could collect to plug the budget deficit. She added that in times like this, when the fiscal house is being put into order, government agencies and corporations had to all pitch in, either to make a contribution or to practice restrain so as not to add to the tax burden.

GFIs Land Bank and the Development Bank of the Philippines have a pending request to the DoF to bring down the rates for both FX cover and guarantee fees of one percent to 0.5 percent. The banks have been asking for the fee reduction for the past two years.

Land Bank as a conduit for loans to the countryside negotiates foreign currency funding from official development assistance (ODA) sources such as the Asian Development Bank, the World Bank and the Japan Bank for International Cooperation.

International loans provide low-cost project financing but these include loan conditions and require sovereign guarantee and FX risk cover.

Last year, GFIs including Development Bank of the Philippines remitted P3.46 billion in guarantee and FX risk cover fees, higher than 2007's P3 billion. Total FX gains reached P1 billion.

For 2009 based on DoF documents, the government is eyeing only P2.5 billion as income from guarantee fees but FX gains are expected to reach P1.8 billion.

The same papers said the government will collect higher guarantee fees of P3.02 billion next year while FX gains will increase to P2 billion.

Land Bank has a good credit rating from international credit rating agencies and the bank was always prompt in paying its obligations to the government.

In 2007 the DoF approved requests to reduce FX cover but only from four to three percent.