The national government has nearly tripled its planned borrowings for the first quarter of 2025 as it seeks to secure funding ahead of the 2025 midterm elections and mitigate risks from rising borrowing costs and market volatility.
In a memorandum released on Monday, Dec. 23, the Bureau of the Treasury (BTr) announced a P629 billion debt paper offering, with P264 billion in Treasury bills (T-bills) and P365 billion in Treasury bonds (T-bonds).
To recall, the government had a total of P310 billion offering in the fourth quarter of 2024, with P220 in T-bills and P90 billion in T-bonds.
According to Michal Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), larger debt paper offerings could help the government borrow more in advance, preparing for the May 2025 midterm elections.
“Also amid some increased market volatility since Trump won the U.S. presidential elections that led to higher U.S. or global bond yields that increased borrowing costs,” Ricafort noted, which positions the government at a disadvantage.
He further noted that increased foreign exchange (forex) volatility, mainly due to the Trump factor and geopolitical risks, has lowered demand for foreign borrowings.
As a result, the government is relying more on domestic borrowings to reduce forex risks, drawing lessons from past crises like the Asian financial crisis in the late 1990s.
Data from the BTr showed that the national government’s debt reached P16.02 trillion as of October 2024, with 67.98 percent from domestic securities and 32.02 percent from foreign debt.
Meanwhile, Department of Finance (DOF) Secretary Ralph G. Recto earlier said that the government plans to cut foreign borrowings to 10 percent over the medium term, with domestic borrowings making up 90 percent.
Recto suggested that the gradual shifting of the borrowing mix to 90-10 would extend beyond 2028 to minimize foreign exchange risks.
Since the Covid-19 pandemic, the government’s increased borrowings have driven up debt servicing costs, including principal and interest payments.
According to Ricafort, these costs have remained high for nearly three years due to pandemic-era loans maturing.