MANILA - State borrowings fell by almost 17% in the 7 months to July, as the government redeemed more debt papers than it issued during the period, Finance department data showed.

Total borrowings hit P276.23 billion as of July, down by 16.74% than the P331.79 billion borrowed in the same period last year.

Domestic borrowings, which comprised the bulk of state borrowings, totaled P135.89 billion as of July, lower than last year’s P285.62 billion. This was mainly due to the net redemption of peso-denominated debt papers that matured in July.

The amount of fixed-rate treasury bonds sold in the first seven months totaled P250.99 billion, while borrowings from last January’s domestic bond exchange amounted to P7.94 billion.

These, however, were partly offset by the P123.04-billion total net redemption of treasury bills from January to July.

The total amount of treasury bills floated during the period reached P360.65 billion, but this was outweighed by the P483.69 billion worth of securities redeemed by the government, ending up with a net redemption of P123.04 billion.

The higher borrowings recorded last year were also due to the sale of P70 billion worth of three-year and five-year retail treasury bonds (RTBs) to social security institutions, state-run firms, and local investors.

Borrowings from external sources, on the other hand, more than tripled to P140.35 billion as of July from P46.16 billion last year.

This was mainly due to the issuance by the government of $750 million worth of global bonds last month to plug a swelling deficit, as well as to fund infrastructure and social programs. The said bond issuance accounted for around P36.07 billion of external borrowings.

Total external borrowings arising from global bond issuances reached P107.46 billion as of July, including the P71.39 billion raised when the state sold $1.5 billion worth of 10-year debt papers last January.

Project loans from multilateral lenders Asian Development Bank, International Bank for Reconstruction and Development, International Fund for Agricultural Development, Japan Bank for International Cooperation, and Overseas Economic Cooperation Fund hit P11.58 billion. Project loans are those with counterpart funding from the government and involve the provision of equipment from donors.

On the other hand, program loans, which refers to financial support incorporated in the budget, hit P21.31 billion.

The government has raised this year’s deficit ceiling to P250 billion, equivalent to 3.2% of gross domestic product, from P199.2 billion as the economic meltdown is expected to put a dent on state revenues.

The higher shortfall, along with the need to increase spending to spur economic activity, will put more pressure on the government to borrow, officials said. Among the funding sources being eyed by the government are additional official development assistance, issuance of RTBs as well as so-called "samurai bonds" or yen-denominated securities sold by foreign entities to the Japanese market.

The Treasury bureau had said gross domestic borrowings may reach P451.8 billion this year, while gross external borrowings may hit P209.1 billion.

In a related development, the National Government earned P8.51 billion worth of dividends in the first seven months, a jump from the P765 million it collected in the first half.

In July alone, dividends collected by the government hit P7.74 billion, higher than the P765 million collected in January to June.

The higher figure was due to the P6 billion worth of dividends remitted to the National Government by the Bangko Sentral ng Pilipinas (BSP) last July. This was made possible by the P8.93-billion net income earned by the central bank last year, a turn-around from the P86.94-billion loss it incurred in 2007.

Republic Act 7656, or the Dividends Law, requires the BSP to remit 75% of its net income to the National government. Other government-owned and -controlled corporations, however, are only required to remit half of their net income.

Dividends remitted to the government form part of non-tax revenues and are incorporated in the Treasury Bureau’s income, which totaled P42.71 billion as of July. — Alexis Douglas B. Romero, BusinessWorld