The government does not expect cheaper loans

By means of Luisa Maria Jacinta C. Jocson, Reporter

THE GOVERNMENT expects much lower borrowing costs going forward, amid further interest rate cuts by the Bangko Sentral ng Pilipinas (BSP) and improved credit ratings.

“Our recent credit rating upgrade will help reduce our financing costs. The reduction in BSP rates will help increase economic growth and also reduce our domestic borrowing costs,” Treasury Secretary Ralph G. Recto told reporters. Business world in a text message.

Earlier this month, Japan-based Rating and Investment Information, Inc. the Philippines’ investment grade rating raised to “A-.”

The country also currently has an “A-” rating from the Japan Credit Rating Agency, but has not yet received an “A” rating from the “big three” credit rating agencies.

Mr Recto said the government has no plans to increase or revise its lending program for now.

“We have one Fiscal plan to follow. There are no plans to increase our borrowing,” he added.

The National Government (NG) borrowing program is set at £2.57 trillion this year, of which 75% will come from domestic sources. It borrows from external and local sources to finance a budget deficit limited to 5.6% of gross domestic product.

The latest data from the Department of Finance shows that debt payments rose 41.29% to P1.28 trillion in the first half. The government has allocated P2.03 trillion in debt for this year.

National Treasurer Sharon P. Almanza also said the current borrowing plan “takes into account” the central bank’s easing cycle.

The Monetary Board cut rates by 25 basis points (bps) earlier this month, bringing the benchmark rate to 6.25%, down from a 17-year high of 6.5%.

The central bank could cut rates by another 25 basis points in the fourth quarter, BSP Governor Eli M. Remolona Jr. said earlier.

“The coming monetary policy easing will bode well for NG’s borrowing plan as it will now be cheaper,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc.

Apart from monetary easing, the country’s investment grade ratings will help support cheaper borrowing.

“The recent upgrade and affThe assessment of current credit ratings from the aforementioned rating agencies gives NG more borrowing options abroad,” said Mr. Asuncion.

Last week, Moody’s Ratings affirmed the Philippines’ investment grade rating of ‘Baa2’ with a ‘stable’ outlook. The country is also rated ‘BBB’ by Fitch Ratings and ‘BBB+’ by S&P Global Ratings.

“If NG continues with its consolidation plan and follows through, the A rating is very possible. Simply put, the coveted A-rating is truly achievable and achievable,” said Mr. Asuncion.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said improved credit ratings will help the country attract investment and support overall growth.

“Increases in the Philippines’ investment grade ratings will enable our government to position the economy as an investment destination given stabilizing macroeconomic indicators, the easing of interest rates in the near future and the government’s ability to ​favorable investment climate,” he said. said.

The government aims to achieve an “A” rating status by the end of the administration or by 2028.

“If the Philippine economy continues to demonstrate stable macroeconomic fundamentals, the economy is on track to achieve successive rating upgrades,” Rivera said.