Gov’t net borrowings up 188% in 9 months The government posted P309.5 billion in net borrowings in the first nine months of the year, up by 188 percent from P107.4 billion a year ago, the Bureau of the Treasury said. BTr data showed that the biggest contributors to the total debt incurred during the period were the P164.36 billion worth of offshore bonds issued, which were denominated in dollars, yen and peso. The government also issued a total of P119.8 billion in retail treasury bonds—a regular batch offered in April and another issuance in August that catered mainly to Filipinos overseas. From January to September, new government borrowings reached P672.24 billion, including P213.84 billion from foreign sources and P458.4 billion from domestic lenders. The nine-month gross borrowings were about 59.6 percent more than the year-ago figure of P421.11 billion, which covered P168.17 billion from abroad and P252.94 billion from local lenders. In the same period, the government paid some P362.73 billion in debts, including P110.66 billion in foreign loans and P252.07 billion in domestic debts. This brought the net borrowings to P309.5 billion. The total payment made in the nine months to September was about 15.6 percent more than the P313.73 billion paid in the same period last year, which covered P87.36 billion for overseas obligations and P226.37 billion for local loans. In September alone, net government borrowings hit P34.7 billion, which was 71.6 percent lower than the P122.53 billion last year. During the month, the government incurred P55.73 billion in new foreign loans, up 113 percent from P26.17 billion in the same month last year. The September inflow was largely from the issuance of peso-denominated global bonds worth P44.1 billion and a P11.04 billion food-crisis loan facility from the International Bank for Reconstruction and Development. Overseas development assistance tapped in the nine months to September fell by 18.5 percent to P49.48 billion from P60.71 billion a year ago. Further, new borrowings from domestic lenders in September reached P31.84 billion, down by three-quarters from P125.79 billion recorded in the same month of 2009. The decrease was partly due the net redemption of T-bills worth P34.26 billion. Also in September, the government shelled out P6.87 billion on payments of foreign loans, increasing by a fifth from P5.67 billion in the same month last year. It also paid P46 billion in domestic debts, nine and a half times the P4.8 billion settled a year ago.
So far, the BSP prefers liberalizing outflows of foreign capital as a means to soften the impact on the exchange rate of the surge in inflows, which come largely in the form of investmentsin the country’s stock market and other portfolio instruments. “Imposing controls should be considered as a last resort when everything else has been considered,” BSP Deputy Governor Diwa Guinigundo said in an e-mail to the Inquirer. Guinigundo said controlling the entry of foreign capital inflows, while it may achieve the short-term objective of arresting the rise of the peso, could have adverse repercussions over the long term. Capital controls could eventually lead to large outflows, which could dry up the economy’s resources, he said. “Controls prevent markets [from] functioning to achieve appropriate resource allocation and limit the potential of the economy,” the central bank official said. What the BSP is looking at to ease the appreciation of the peso, due to rising foreign capital inflows, is to raise the ceiling on the amount of foreign currency that may be brought out of the country without submitting documentary requirements to the BSP. Currently, the ceiling is set at $30,000 for payments for foreign services and $30 million for investments offshore. The rise in foreign capital inflows, which recently led the Philippine Stock Market Index to a record high, pushed the peso to hover in the 43-to-a-dollar level. Traders said the peso is likely to strengthen in the months ahead, to potentially hit the 42:$1 mark. Last year, the peso closed in the 45:$1 territory. Monetary authorities said the rise of the peso has its benefits, citing its ability to temper overall inflation and reduce dollar-denominated debts of the government and private firms. However, the appreciation of the peso has caused discomfort among exporters, who said the rising currency is making Philippine-made goods more expensive in dollar term and, therefore, less competitive. The BSP said it does not have a bias in favor of a strong or weak peso but that it tries to temper volatility, saying large fluctuations are disruptive to business. |
U.S. Stocks Climb as G-20 Meeting Fuels Fed Easing Speculation U.S. stocks rose, sending the Standard & Poor’s 500 Index to a fourth straight gain, after the Group of 20 nations pledged to avoid “competitive devaluation” of currencies and investors bet the Federal Reserve will announce further bond purchases next week. DuPont Co., Kraft Foods Inc. and Walt Disney Co. climbed more than 1.4 percent to lead gains in the largest U.S. companies. Citigroup Inc. rallied 2.4 percent as Goldman Sachs Group Inc. added the shares to its “conviction buy” list. CommScope Inc. surged 30 percent as a private equity firm considers a takeover. Office Depot Inc. gained 3.5 percent after saying earnings will beat estimates. The S&P 500 advanced 0.2 percent to 1,185.62 at 4 p.m. in New York, adding to three weeks of gains and climbing above its highest close since May 3. The Dow Jones Industrial Average rose 31.49 points, or 0.3 percent, to 11,164.05. |
| Oil Falls From One-Week High on Dollar Rebound, Forecast U.S. Supply Gain Crude oil rose for a second day as the dollar slumped to a 15-year low against the yen, bolstering the appeal of raw materials as an alternative investment. Oil climbed 1 percent as the U.S. currency dropped on skepticism the Group of 20 pledge to avoid devaluations can stem the dollar’s decline. Workers at three French oil refineries voted to return to work as a contested pension bill neared parliamentary approval. “Today’s move is dollar related,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “We should continue to track the dollar this week and will also be keeping an eye on equities.” Crude oil for December delivery gained 83 cents to settle at $82.52 a barrel on the New York Mercantile Exchange. Futures are up 2.5 percent from a year ago. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
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