Government borrows ₱540B from central bank as total debt sustains climb

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Metro Manila (CNN Philippines, September 30) — ​​​​​​​The Duterte government has asked for a fresh credit line from the Bangko Sentral ng Pilipinas worth ₱540 billion to support budget needs as the pandemic drags on.

BSP Governor Benjamin Diokno said Wednesday that the national government sought the amount as budget support, hoping to plug the country's ballooning fiscal deficit due to the COVID-19 pandemic. The loan line must be settled by December 29, 2020 at zero interest.

This is the second request made by the state from the BSP, an entity considered as the lender of last resort. In March, the Bureau of the Treasury was given ₱300 billion in short-term credit, also meant to pad public coffers in responding to the pandemic.

The latest request still needs to be approved by the central bank's Monetary Board.

The country's debts reached ₱9.62 trillion in August as the government sought more funds amid the COVID-19 crisis, the Treasury said Wednesday.

The national government borrowed an additional ₱450.9 billion for the month, an increase of nearly 5 percent from July and more than a fifth compared to August 2019.

The country has borrowed an additional ₱1.59 trillion so far this year, or 24.4 percent higher than the end-2019 level of ₱7.73 trillion.

The Treasury attributed the August increase to additional fundraising activities from local investors.

The domestic debt stock reached ₱6.71 trillion in August, growing by ₱456.53 billion from a month ago as the government issued more debt papers, mainly from Treasury bills, bonds, and retail Treasury bonds issued earlier this year.

The Philippines also sourced ₱2.9 trillion funds from foreign sources, split between foreign currency debt papers issued to global players and foreign loans. This spelled a slight decline from July's tally, benefiting from a stronger peso-dollar rate.

Despite accumulating more debt, the government has scaled down guarantees, which dropped by 8.8 percent to ₱447 billion compared to a year ago.

Diokno has assured that the government will not default on its rising payables, adding that the country's abundant gross international reserves provides that cushion.

"We have close to $100 billion in gross international reserves so walang threat na hindi tayo makakabayad ng utang [there's no threat that we will not be able to pay our dues]," Diokno said during a Malacañang briefing.

The Department of Finance earlier said it will keep government debt at less than half the size of the local economy, as it seeks to boost the state's cash supply to respond and implement COVID-19 measures quickly.

Government debt is seen to hit ₱10.16 trillion by December, data from the Budget Department showed.