RP to borrow from ADB as deficit nearly triples

MANILA, Philippines - Manila will tap an Asian Development Bank (ADB) loan during the last quarter, allowing the country to pay for this year’s deficit that is seen to hit nearly thrice last year’s shortfall. Worth $500 million, the official development assistance loan will be used to increase government spending, one of the many tools intended to stimulate the local economy, National Treasurer Roberto Tan said. The government received “positive feedback" from its meetings with the multilateral lender, Tan said, citing discussions during the 42nd Annual Meeting of the ADB held in Bali, Indonesia. “It will be part of the expenditure program. ADB is supporting the program stimulus of its member countries," he added. The Philippines is currently staring at a wider budget deficit of P199.2 billion, equivalent to 2.5 percent of gross domestic product (GDP). Besides being P22 billion more than the revised deficit cap of P177.2 billion, the figure is also almost three times the budget deficit of P68.1 billion or 0.9 percent of GDP incurred by the national government last year. The country’s widening fiscal condition has prompted authorities to tweak its borrowing program by increasing funds to be sourced from foreign creditors and cutting funds from local creditors. The Philippines also increased its borrowing program by P24.5 billion to P613.9 billion instead of P589.4 billion. An estimated 72 percent of total borrowings would be sourced from domestic creditors while 28 percent would come from foreign sources. Previously, the country’s borrowing mix was 75 percent from domestic sources and 25 percent from foreign creditors. About P174.9 billion would come from foreign creditors or P27.5 billion more than the revised foreign borrowings of P147.4 billion. Domestic borrowings through the sale of government securities such as treasury bills and treasury bonds was reduced by P3 billion to P439 billion from P442 billion. Last January, Manila was able to raise $1.5 billion after selling 10-year US dollar denominated benchmark bonds. It has also raised its programmed ODA loans to $1.6 billion instead of only $1.1 billion. For its part, the ADB has hiked lending assistance by more than $10 billion to $32 billion in 2009-2010 compared with about $22 billion in 2007-2008. Besides project investments, the assistance covers quick-disbursing policy-based loans, guarantees, and new initiatives designed to address specific crisis needs. The Manila-based lender also intends to launch a $3 billion fund through the Countercyclical Support Facility to help developing member countries accelerate fiscal spending needed to overcome the global economic crisis and help sustain longer-term growth. - GMANews.TV