Higher deficit ceiling forces tweaks to PH borrowing plan
The Marcos administration is slightly increasing the government’s borrowing plan for this year to bankroll its higher budget deficit ceiling—a result of the downward revision to its revenue target amid external headwinds weighing on the economy.
In a text message to the Inquirer, Finance Secretary Ralph Recto said the financing program of the government would increase to about P2.6 trillion, from the previous target of P2.55 trillion.
This was after the interagency Development Budget Coordination Committee (DBCC) raised the budget deficit limit for 2025 to 5.5 percent of gross domestic product (GDP) from the previous ratio of 5.3 percent. The revision was triggered by the downward adjustment to the revenue goal to P4.52 trillion from P4.64 trillion before.
Policymakers typically peg the revenue target of the government to the projected performance of the economy. Last week, the DBCC also lowered the official GDP growth target range for 2025 to between 5.5 percent and 6.5 percent, from the previous band of 6 percent to 8 percent, due to “heightened global uncertainties.”
Recto explained that the “0.2 [percentage point] increase [in the deficit-to-GDP ratio] is roughly equivalent to P50 billion” in additional borrowings.
Difficult
In a commentary, analysts at Nomura, Euben Paracuelles and Yiru Chen said the latest tweaks to the fiscal program showed how difficult it was to contain the budget deficit without new reforms that could boost revenues.
“These adjustments, the second set of revisions, are in line with our long-held view that DBCC’s targets are challenging to meet due to the government’s prioritization of large infrastructure spending, while revenues will likely underperform, in part because reforms are now more difficult to enact following the midterm elections,” Paracuelles and Chen said.
“The government is materially slowing the pace of fiscal consolidation but not completely abandoning it, likely in response to a weakening growth outlook due to external headwinds,” they added.
Latest data from the Bureau of the Treasury showed the total financing raised by the government amounted to P192.3 billion in May, falling by 25.8 percent year-on-year. This brought the five-month borrowings to P1.3 trillion, lower by 6.7 percent.
Broken down, the government raised P6.2 billion in external financing in May, plummeting by 95.1 percent. Recto said previously the state had already frontloaded most of its foreign funding requirements very early into the year in order to get the cheapest rates possible.
Gross domestic borrowings, meanwhile, went up by 41.3 percent to P186.1 billion. The government is planning to raise P690 billion in local financing in the third quarter.
