RP to cover deficit by selling more debt papers
06/29/2009 | 02:36 PM
MANILA, Philippines - The Philippines will increase borrowing in the third quarter this year by selling more government securities, allowing it to raise cash and use proceeds to cover a larger budget deficit.
A total of P110.5 billion new treasury bills and treasury bonds will be sold, higher than the previous quarter’s P104.5 billion, data from the Bureau of Treasury (BTr) showed.
Of the amount, P59.5 worth of T-bills will be sold while the remaining P51 billion will be in the form of T-bonds. T-bills are government debt papers that mature in less than a year while T-bonds are those that fall due in more than a year.
For July, the government will be selling a total of short-term debt papers worth P25.5 billion, or at P8.5 billion per auction. Only two auctions for T-bills will be undertaken for August and September.
Moreover, the BTr will also be selling more of the benchmark 91-day T-bill, used by lenders to price their loans, to P2 billion during the third quarter from P1.5 billion the previous quarter.
Similarly, the BTr will also be increasing the sale of its 182-day debt paper to P3 billion from the previous P2.5 billion while the 364-day securities will remain unchanged at P3.5 billion.
T-bills to be sold in the third quarter will be higher by P14.5 billion than the P45 billion sold in the previous quarter.
Meanwhile, the government will also sell more long-term debt papers worth P17 billion monthly through a P8.5 billion auction to be undertaken twice every 30 days from July to September.
These debt papers will fall due in more than a year.
Increased sale of debt papers have reflected Manila’s growing need to raise more cash and secure more borrowings because it is being faced with a bigger deficit that is estimated to reach P250 billion.
The government will no longer sell securities that will fall due in three years and 20 years unlike in the second quarter. From April to June, P8.5 billion worth of three-year and 20-year bonds were sold.
The increase in the amount of debt papers reflects the government’s growing need to tap more borrowings in the face of a bigger deficit now estimated at P250 billion from the previously revised P199.2 billion.
From January to May, the Philippines’ budget deficit surged by more than six times as the government collected fewer taxes and accelerated spending to stimulate economic growth.
As a result, the government was forced to borrow by 20 percent more compared to the same period last year, BTR data showed.
Local and foreign borrowing reached P258.6 billion during the period, P42.55 billion more than the P216.05 billion it borrowed in the same period last year.
This developed as the deficit increased to P123.2 billion during the said period, more than six times the P18.8 billion gap posted last year.
Leftist group warns of looming fiscal crisis
Meanwhile, the national government’s increasing deficit indicates that the Philippines is on the brink of another fiscal crisis, militant think tank IBON Foundation has said.
A fiscal crisis occurs when the government undertakes chronic overspending and/or when it fails to meet its tax targets. This prompts international ratings agencies to reduce its credit ratings, making it more expensive for a sovereign like the Philippines to borrow more.
IBON called on government to revisit its debt policy and consider outright debt cancellation to free up domestic resources to deal with the raging crisis.
It said this foreshadows soaring debt service, depressed spending on social services and eventually higher taxes, as what the country experienced in 2002.
A deficit of this size this early in the year is alarming especially considering that the global crisis has yet to fully play out in the domestic economy, including on revenue collections, it said.
The group also noted the deficit trend is worryingly similar to that in 2002 when it reached a record P210.7 billion in 2002 which was equivalent to 5.4 percent of gross domestic product (GDP).
In 2004, a group of economists from the University of the Philippines (UP) have expressed the same sentiments through a so-called “white paper" it issued in the UP School of Economics website.
Two decades earlier, the same group of economists – including three former Cabinet secretaries under the Aquino and Ramos administrations – who warned the Marcos regime about its overspending. - GMANews.TV
A total of P110.5 billion new treasury bills and treasury bonds will be sold, higher than the previous quarter’s P104.5 billion, data from the Bureau of Treasury (BTr) showed.
Of the amount, P59.5 worth of T-bills will be sold while the remaining P51 billion will be in the form of T-bonds. T-bills are government debt papers that mature in less than a year while T-bonds are those that fall due in more than a year.
For July, the government will be selling a total of short-term debt papers worth P25.5 billion, or at P8.5 billion per auction. Only two auctions for T-bills will be undertaken for August and September.
Moreover, the BTr will also be selling more of the benchmark 91-day T-bill, used by lenders to price their loans, to P2 billion during the third quarter from P1.5 billion the previous quarter.
Similarly, the BTr will also be increasing the sale of its 182-day debt paper to P3 billion from the previous P2.5 billion while the 364-day securities will remain unchanged at P3.5 billion.
T-bills to be sold in the third quarter will be higher by P14.5 billion than the P45 billion sold in the previous quarter.
Meanwhile, the government will also sell more long-term debt papers worth P17 billion monthly through a P8.5 billion auction to be undertaken twice every 30 days from July to September.
These debt papers will fall due in more than a year.
Increased sale of debt papers have reflected Manila’s growing need to raise more cash and secure more borrowings because it is being faced with a bigger deficit that is estimated to reach P250 billion.
The government will no longer sell securities that will fall due in three years and 20 years unlike in the second quarter. From April to June, P8.5 billion worth of three-year and 20-year bonds were sold.
The increase in the amount of debt papers reflects the government’s growing need to tap more borrowings in the face of a bigger deficit now estimated at P250 billion from the previously revised P199.2 billion.
From January to May, the Philippines’ budget deficit surged by more than six times as the government collected fewer taxes and accelerated spending to stimulate economic growth.
As a result, the government was forced to borrow by 20 percent more compared to the same period last year, BTR data showed.
Local and foreign borrowing reached P258.6 billion during the period, P42.55 billion more than the P216.05 billion it borrowed in the same period last year.
This developed as the deficit increased to P123.2 billion during the said period, more than six times the P18.8 billion gap posted last year.
Leftist group warns of looming fiscal crisis
Meanwhile, the national government’s increasing deficit indicates that the Philippines is on the brink of another fiscal crisis, militant think tank IBON Foundation has said.
A fiscal crisis occurs when the government undertakes chronic overspending and/or when it fails to meet its tax targets. This prompts international ratings agencies to reduce its credit ratings, making it more expensive for a sovereign like the Philippines to borrow more.
IBON called on government to revisit its debt policy and consider outright debt cancellation to free up domestic resources to deal with the raging crisis.
It said this foreshadows soaring debt service, depressed spending on social services and eventually higher taxes, as what the country experienced in 2002.
A deficit of this size this early in the year is alarming especially considering that the global crisis has yet to fully play out in the domestic economy, including on revenue collections, it said.
The group also noted the deficit trend is worryingly similar to that in 2002 when it reached a record P210.7 billion in 2002 which was equivalent to 5.4 percent of gross domestic product (GDP).
In 2004, a group of economists from the University of the Philippines (UP) have expressed the same sentiments through a so-called “white paper" it issued in the UP School of Economics website.
Two decades earlier, the same group of economists – including three former Cabinet secretaries under the Aquino and Ramos administrations – who warned the Marcos regime about its overspending. - GMANews.TV
