THE government will now source at least 70% of its borrowing program from domestic lenders, revising the previous 75:25 mix as more foreign loans are expected to pour in to help plug its funding needs for coronavirus disease 2019 (COVID-19) pandemic.

National Treasurer Rosalia V. de Leon said the government’s revised borrowing mix could now range between 70:30 and 72:28 — still in favor of domestic lenders to minimize foreign exchange risks and volatility — from its initial target of 75:25 ratio.

She said the government can still source most of its financing needs from the local market amid strong liquidity given the recent monetary easing rolled out by the central bank, such as the reserve requirement ratio (RRR) cut.

“We target between 70 to 72% for domestic borrowings as we see market players now participating as liquidity [gets an] additional infusion from RRR cuts and large redemption of RTB3-08,” Ms. De Leon told reporters in a Viber message, referring to retail Treasury bonds that were issued in 2017 and matured on April 11.

For this month alone, the Bureau of the Treasury (BTr) plans to borrow P190 billion from the local market via a mix of short-term and long-term government bonds.

For foreign loans, the government wants to borrow P310 billion from multilateral lenders, including the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank, as well as its other partners to partially fund a P1.17-trillion economic package for its COVID-19 response.

So far, the World Bank has approved a $500-million (around P25-billion) loan to support the country’s disaster response capacity, a part of which will be used to respond to the pandemic. The government is seeking another $100-billion loan from the lender to help fund efforts to contain COVID-19, which is expected to be acted on by the World Bank’s board on April 20.

The government has set a P1.4-trillion borrowing plan this year to be sourced from foreign and domestic lenders to fund its budget deficit as it spends more than its revenues to support infrastructure projects and boost economic growth.

With rising spending needs and an expected decline in revenues amid lower tax collections due to disruptions caused by the virus, the government could increase its borrowings to plug the government’s budget gap that could balloon to as much as 5.3% of gross domestic product, Finance Secretary Carlos G. Dominguez III earlier said.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said a 70:30 borrowing mix is still “prudent and safe” and minimizes reliance on foreign currency denominated debt.

However, Mr. Asuncion said the ratio could be revised again as the impact and duration of the COVID-19 outbreak remains uncertain.

“This 5% rise (in foreign loans), I think, is still prudent and safe. However, with the situation fluid and uncertain, the ratio may consequently change. Still, a 70-30 is considered safe,” Mr. Asuncion said via Viber.

“If a considerable portion of our debt are foreign currency dominated and our external position weakens, payment of those debts would be very costly and even unsustainable. The smaller our exposure to foreign currency denominated debts, the better we can manage our debt stock,” he said. — Beatrice M. Laforga