Govt borrows more for 2009 as deficit widens
abs-cbnNEWS.com | 11/14/2008 12:15 AM
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The government has increased its foreign and domestic borrowings by about 16.5 percent to finance the budget deficit that is expected to balloon to P102 billion next year as the economy of the Philippines and that of countries we trade with, and send OFWs to, slow down.
Finance secretary Margarito Teves said the they would borrow P509.9 billion from both foreign and domestic creditors next year or P72.8 billion more than the programmed borrowing of P437.1 billion under the 2009 budget.
Of the total borrowings, Teves said 76 percent would be sourced locally through the issuance of treasury bills and treasury bonds. Foreign commercial sources and multilateral lending agencies would be tapped for the rest.
“Given market volatilities, similar funding strategy of 24 percent foreign and 76 percent domestic will be pursued next year,” said Teves.
Based on submissions to the senate Committee on Finance, the government would borrow P386.5 billion from domestic creditors or about P65 billion more than the P321.5 billion programmed for next year.
Around P123.4 billion would be sourced from foreign sources, including World Bank, Asian Development Bank, and Japan Bank for International Cooperation. The amount is P7.8 billion higher than the programmed foreign borrowing of P115.6 billion next year.
As early as May this year, the government decided to abandon its commitment to balance the budget this year and postpone fiscal consolidation back to the original 2010 schedule due to adverse external developments brought about by higher oil and food prices.
Under the proposed 2009 budget, the government expected to book a budget shortfall of P40 billion or 0.5 percent of gross domestic product from the projected shortfall of P75 billion or one percent of GDP this year.
However, the government now expects a budget shortfall of P102 billion or 1.2 percent of GDP next year after the Cabinet-level Development Budget Coordination Committee further scaled down the GDP growth next year to a range of 3.7 percent to 4.7 percent from the original 5.1 percent to 6.1 percent.
Teves said the “impact of the global financial turmoil will be more pronounced next year” and a slower economic growth next year would result in a reduction in government revenues amounting to P40.7 billion and a P34.5 billion increase in expenditures arising from higher interest payments.
The Philippines relies heavily on foreign and domestic borrowings to finance the budget deficit and at the same time pare down its financial obligations.
Of the total amount to be borrowed next year, about P125.1 billion would be used to finance the budget deficit while P384.8 billion would be used to pare down the government’s foreign and domestic debt.
“Given higher deficit for 2009, we have to secure a net financing of P125 billion,” Teves added.
Next year’s budget shortfall would be the highest since 2005 when the national government incurred a budget deficit of P146.8 billion. It is also 36 percent wider than the projected shortfall of P75 billion this year.
