Government borrowings climb 40% in August

THE NATIONAL Government’s (NG) gross borrowings rose by 40.28% year on year in August as domestic debt jumped on increased issuances of government securities, the Bureau of the Treasury (BTr) reported.

Treasury data showed that gross borrowings increased to P174.03 billion in August from P124.06 billion in the same month a year ago.

However, month on month, state borrowings declined by 7.75% from P188.65 billion in July.

Domestic debt accounted for the bulk or 95.98% of the government’s gross borrowings last month, Treasury data showed.

Gross domestic borrowings surged by 42.33% to P167.05 billion in August from P117.37 billion in the same month in 2023.

Broken down, domestic debt in August consisted of P140 billion in fixed-rate Treasury bonds (T-bonds) and P27.05 billion in net issuances of Treasury bills (T-bills).

These were higher than the P110.235 billion in T-bonds and the net P7.139 billion in T-bills issued in the same month last year.

On the other hand, gross external borrowings also rose by 4.64% to P6.99 billion in August from P6.68 billion a year ago, according to BTr data. This was entirely made up of new project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the higher borrowings for the month to increased issuances amid maturing debt.

“The increase in the NG gross borrowings may have been attributed to higher maturing debt in August 2024 that required new borrowings to serve the matured government securities,” he said in a Viber message.

Year to date, gross borrowings as of end-August increased by 16.97% to P1.93 trillion from P1.65 trillion in the same period in 2023, Treasury data showed.

For the first eight months, 85.49% of NG borrowings came from the domestic market.

Gross domestic borrowings jumped by 32% to P1.65 trillion in the period from P1.25 trillion a year ago.

These were made up of P904.21 billion in fixed-rate T-bonds, P584.86 billion in retail Treasury bonds, and P161.7 billion in net issuances of T-bills.

On the other hand, external gross borrowings dropped by 28.41% to P282.46 billion as of August from P394.56 billion in the comparable year-ago period.

Broken down, these consisted of P115.25 billion in global bonds, P100.5 billion in program loans, and P66.72 billion in new project loans.

“Borrowings increased due to the persistent budget deficit, albeit narrowing due to fiscal consolidation,” John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said in a Viber message. “It can also be due to increased funding requirements given unforeseen outlays like calamity response, reconstruction, among others.”

The government’s budget deficit narrowed by 4.85% to P697 billion in the January-August period from P732.5 billion a year prior.

“For the coming months, NG debt borrowings and debt servicing could be tempered by the narrower budget deficit recently, and further US Federal Reserve rate cuts in the coming months that could be matched locally,” Mr. Ricafort added.

The Fed this month started its long-awaited easing cycle with a 50-basis-point (bp) cut, bringing its target rate to the 4.75-5% range. Markets are pricing in more reductions at the US central bank’s Nov. 6-7 and Dec. 17-18 reviews.

Meanwhile, BSP Governor Eli M. Remolona, Jr. last week said the central bank could deliver a 25-bp cut at each of its remaining meetings for the year scheduled for Oct. 17 and Dec. 19.

The Monetary Board in August reduced borrowing costs by 25 bps, bringing the key rate to 6.25% from the over 17-year high of 6.5%. This marked its first easing move in nearly four years.

For this year, the NG plans to borrow P2.57 trillion, with 75% coming from local sources and 25% from external sources, to help fund its P1.48-trillion budget deficit that is equivalent to 5.6% of gross domestic product. — Beatriz Marie D. Cruz