Gov’t borrowings down sharply in April by 31.3%

Gross borrowings of the Marcos administration fell in April after public sector appetite for both domestic and foreign credit to bankroll infrastructure projects and social services weakened amid tight liquidity conditions.

Data from the Bureau of the Treasury (BTr) showed the combined gross domestic and external borrowings of the government amounted to P89.2 billion in April, down by an annualized rate of 31.3 percent.

The state’s four-month gross financing, however, was still up by 20 percent to P1.2 trillion.

Dissecting the latest cash operations report of the BTr, local borrowings fell by 14.3 percent to P82.4 billion in April.

This figure included P15.1 billion in short-term financing via weekly issuance of Treasury bills and P67.3 billion in long-dated debts raised during the regular offering of Treasury bonds.

Local debt

Since the beginning of the year, inflows of domestic borrowings amounted to P1 trillion, marking a 33.5-percent increase.

Meanwhile, gross foreign financing plummeted by a larger 80 percent to P6.8 billion in April, mainly due to lack of new program loans. The amount only included project loans incurred during the month, figures from the BTr showed.

From January to April, offshore borrowings reached P124.1 billion, down by 62.3 percent compared with a year ago due to lack of major fundraising activity overseas during the period.

The weakness in state appetite for new financing came amid a high interest rate environment that has squeezed debt markets at home and abroad.

The good news is that the Bangko Sentral ng Pilipinas (BSP) had hinted at two 25-basis-point rate cuts this year, with the first one possibly in August and ahead of the US Federal Reserve’s own easing move.

This, as Governor Eli Remolona Jr. acknowledged that present liquidity conditions are tighter than necessary.

Rate cut

That expectation of a decline in borrowing costs is expected to increase public sector appetite for credit.

Earlier this month, the government raised $2 billion in fresh borrowings from its issuance of dual-tranche US dollar bonds, which was part of President Marcos’ broader plan to raise $5 billion in financing from markets overseas this year.

Overall, the Department of Finance had announced a bigger borrowing plan for this year at P2.57 trillion—from the old program of P2.46 trillion—as the government raises funds to plug a bigger-than-previously-expected budget hole of P1.5 trillion.