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THE
government rejected on Tuesday a proposal for the
Department of Finance (DOF) to stop borrowing in US
dollars next year and instead conduct its financing
activities wholly in local currency.
The
rejection means next year’s $2.6-billion
foreign-borrowing program would proceed largely
unchanged, even though Finance Secretary Margarito Teves
pledged to look into the program and try to accommodate
the proponent, the Bangko Sentral ng Pilipinas (BSP).
“The
government is not scrapping foreign borrowings next
year, although we’re looking into the proposal sourcing
more financing from domestic sources to help stem the
peso appreciation and partially address the concerns of
exporters,” Teves said in a text message.
BSP
Governor Amando M. Tetangco Jr. earlier urged the
government to reduce the volume of its foreign-currency
borrowings next year to help them manage better the
peso, whose 11-percent appreciation from year-to- date
has wrought havoc on exporter earnings and the
beneficiary families of overseas Filipinos.
Teves
indicated he was not sold entirely on the idea, saying
the DOF would “try to strike a balance between the need
to help stabilize the peso and our own borrowing program
based on opportunities presented to us.”
According to Teves, who aims to balance the nation’s
budget by next year, what they do next year was certain
to be “neutral or advantageous to government.”
Under
next year’s program, Teves needs to borrow $1 billion
from commercial sources to realize a balanced budget.
He has
laid out borrowings of another $1.6 billion in the form
of official development assistance or ODA loans carrying
less-than-market interest rates.
Teves’s
virtual rejection of Tetangco’s call for help could
deepen the BSP’s foreign-exchange losses already
totaling some P50 billion in the first seven months.
Such
could affect the central bank’s bottom line and could
diminish or even cancel entirely the annual BSP
remittance of dividends to the national coffers.
The BSP
has been remitting a portion of its profits in the form
of dividends totaling P3 billion or even higher in a
given year.
A
deliberate abstention from the foreign credit market
next year should go a long way toward helping the BSP
manage the surging value of the peso on one hand and
reduce the cost of sterilizing the impact of sustained
foreign flows that is hurting their bottom line on the
other.
The
foreign-exchange purchases necessary to keep the peso in
line swells the overall liquidity that has to be mopped
up via a number of ways, all of them entailing costs
that have proven expensive to the monetary authorities.
Teves,
on the other hand, is only concerned with whether he
sticks to or lets go of this 2008 gross borrowing
program totaling P346 billion, of which P125.4 billion
were to be borrowed abroad and only P220.7 billion from
domestic creditors.
Although
Teves is confident of raising all the funds the
government requires next year to keep the country’s
budget in balance, the maturing of certain foreign debts
had to be refinanced just the same and this keeps them
on the borrowing lane. |
