The Bangko Sentral ng Pilipinas (BSP) on Wednesday, Aug. 2, has issued an advisory reminding both the public or government sector, and private entities, such as banks and corporates, to submit its foreign borrowing plans by Sept. 30 this year.
These foreign borrowing plans are for the fourth quarter 2023 and for the full-year 2024 period.
The BSP is mandated to review all foreign borrowing plans for external debt management under the rules of the country’s foreign exchange (FX) transactions and policies.
To be reviewed are both the public and private sector’s medium- and long-term foreign loans or borrowings from non-residents, including offshore issuances of debt instruments, and their plans to issue onshore debt instruments that require settlement in foreign currency.
In every review of the country’s foreign borrowing plans, the BSP also takes into consideration any foreign borrowing limit if they have one, at any given year.
The BSP makes it mandatory to submit foreign borrowing plans to monitor the magnitude and timing of foreign financing requirements which would help them in their capital flows projections and its implications on the economy.
The BSP also wants to know the purpose – particularly the private sector’s – why they have to borrow from overseas. Banks, foreign parent companies and affiliates, borrow offshore via the issuance of bonds or securities in the international capital markets.
From the submissions of both the private and public sector of their planned foreign loans, the BSP could estimate what it called an “indicative funding requirements” every year.
The BSP has scrapped the imposition of a foreign borrowing limit since 2018 but to be prudent, and given the increased foreign debt due to Covid-related external loans, the central bank could consider a ceiling for 2024.
In the past, the BSP has a foreign loan ceiling as high as $12 billion or a low of $5 billion.
The BSP explained that the approval mechanism allows it to analyze the size of external debt and its implications on economic variables such as gross international reserves, balance of payments and money supply.