MANILA, Philippines – The government is looking to prepay its 2014 borrowings requirements to take advantage of the country’s low interest rates and excess liquidity.
“We need to be flexible. We’re considering several options including possible prefunding to lock in currently low interest rates as well as increased investor appetite,” National Treasurer Rosalia De Leon said in a text message.
De Leon said the government is hoping to tap the P1.4 trillion funds expected to exit the Bangko Sentral’s special deposit accounts (SDAs).
Banks were given until the end of November to withdraw all funds from the SDA facility.
Budget and management Secretary Florencio Abad said the county’s deficit is expected to ease further this year if the Supreme Court fails to lift an order stopping the release of the remaining P14.7 billion out of the P24.7 billion Priority Development Assistance Fund (PDAF) this year.
Abad said a lower deficit will translate to lower borrowing needs for the government , lower liabilities and huge interest payment savings.
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As of end-July this year, the government’s deficit stood at P104.51 billion, still well below its full-year forecast of P238 billion.
The Philippines plans to raise nearly all of its debt requirements locally amid near record low interest rates and a highly liquid financial market.
The Aquino administration has programmed to borrow P735 billion of debt this year (P630.6 billion locally and P104 billion overseas).
Domestic borrowings are mostly composed of the usual Treasury bills and treasury bonds.
Government borrowings in the first semester decreased 36.23 percent to P247.07 billion from P387.46 billion in the same period last year as the Aquino administration continued to pare down external debt.
The decline in external borrowings is in line with the government’s liability management program, aimed at boosting the country’s peso portfolio while at the same time reducing the foreign currency component of its debt.
De Leon said the government is also studying the sale of inflation-linked bonds this year.
The government remains bent on trimming the budget deficit as a proportion of the gross domestic product as it seeks to achieve sustained inclusive growth.