By Elijah Joseph C. Tubayan
Reporter
THE GOVERNMENT plans to borrow up to P1.189 trillion in 2019 to help finance its spending plan, 33.85% more than the P888.23 billion initially programmed for this year, National Treasurer Rosalia V. De Leon told reporters in a mobile phone message on Monday.
Of next year’s total, P891.7 billion will be sourced locally and P297.2 billion from external creditors. The Development Budget Coordination Committee in its July 2 meeting finalized a 65-35 borrowing ratio in favor of domestic sources for 2018, and a 75-25 ratio for 2019 to 2022.
“For next year… it all depends on how the market external and domestic (conditions) play out,” Ms. De Leon said.
“If we can be able to tap more going into next year then we can go into that 75-25. Otherwise, we’ll have to see if there will also be good opportunities for doing more external financing — new external meaning to say not just our commercial borrowings, but even the ODA (official development assistance), we can increase our program loans.”
Ms. De Leon said the government could still revise its borrowing program “depending on market conditions.”
Traders interviewed on Monday said that the government faces stiffer borrowing costs here and abroad, with the Bangko Sentral ng Pilipinas (BSP) itself raising policy interest rates by a cumulative 50 basis points in its May and June policy reviews after keeping them steady for nearly four years.
And with inflation expected to peak this quarter further past an official 2-4% full-year target — June saw a fresh five-year-high 5.2% overall price surge that spurred the year-to-date pace to 4.3% — some analysts expect a third rate hike at the Aug. 9 meeting of the BSP’s Monetary Board.
AT A DISADVANTAGE
“They’ll (government) have to give in to higher rates because inflation is going up. But we don’t know yet if the latest (inflation) figure is the peak considering rate hikes by BSP will be felt next year. So we don’t know if the (interest) rates will go up,” one trader said in a telephone interview on Monday.
“They (BSP) might hike this coming August because of the pressures on the local currency market.”
Another trader said that the government will be at a disadvantage now that it is forced to accept more bids with higher yields sought.
“[In t]he past auctions they kept on rejecting; so they’re quite behind on their requirements. Actually we’re expecting another rate hike as we need to catch up with the real rates. So we’re expecting the hike this August,” she said in a separate phone interview.
“The high side in the Treasury bills results is already higher by a quarter basis points,” the trader noted.
“Definitely they have to really increase the rates as much as they want to deny it that inflation is supposedly transitory, but the data shows otherwise. So they would really be forced to accept the bonds at a higher cost.”
MORE FROM OFFSHORE MARKETS
Ms. De Leon said that the government has also been considering the euro bond market, apart from the planned yen-denominated “samurai” bond sale by early fourth quarter and will proceed with the planned dollar-denominated global bonds.
“We are also looking at the euro market, pero kasi by that time — August of 2019 — baka mag-taper na rin si (European Central Bank President Mario) Draghi. So we’ll also have to see about the euro market,” the National Treasurer said.
Also planned some time in the future is another sale of renminbi-denominated “panda” bonds and a maiden offer of Islamic sukuk bonds.
“We will start siguro the process for the ‘panda’ (bonds) because it will take some time. We might be again tapping the ‘panda’ (market) but we have to go all over again for the same process,” Ms. De Leon said.
“We are also looking at the sukuk, there would still some regulatory challenges there.”
Ms. De Leon earlier said that there is about $2 billion borrowing space for offshore bond offers left for this year.
The government plans to spend more than P8 trillion on infrastructure up to 2022, when President Rodrigo R. Duterte ends his six-year term, in a bid to fuel economic growth to 7-8% annually up to that year.

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