BSP caps 2014 foreign borrowing

The Bangko Sentral ng Pilipinas (BSP) is limiting the country s foreign borrowing
this year at $5 billion to ensure size of external debt stays within manageable
levels.
This is the second consecutive year that the central bank has capped foreign loa
ns ceiling at this level. In 2012 the borrowing cap was at $8.5 billion, in 2011
it was higher at $10 billion and the highest was $12 billion in 2010.
The limit covers both the government or public sector and the corporate or priva
te sector foreign borrowing.
Sources said the Monetary Board
5-billion ceiling for 2014.

BSP s policy-making arm

has approved to keep the $

The report to the Monetary Board indicated that the 2014 ceiling is still consis
tent with maintaining healthy external debt ratios and ensuring sustainability of
the country s debt management program.
The BSP also noted that public and private sector s foreign borrowing plans seem t
o still favor sourcing their financing requirements from the domestic market des
pite the sovereign s improved investment grade status.
Late last week the government raised $1.5 billion from the international bonds m
arket. For the rest of the year, both the government and corporate sectors have
indicated intentions to source funding locally.
The central bank, which regularly reviews the effectiveness of imposing annual c
eilings on foreign loans and its impact on controlling the size of Philippine de
bt, implemented higher limits in 2010 and 2011 as there was a need at that time
for more foreign currency denominated loans to finance the government s public-pri
vate partnership (PPP) program at the time.
The Monetary Board has given banks and financial institutions until December 201
6 a separate single borrower s limit of 25 percent of the net worth of the lending
bank to corporations undertaking PPP-eligible projects in a bid to open a wider
venue of funding sources for the private sector.
Of the $5 billion borrowing cap, while the public sector has the bigger share of
the allowable external loans, any amount unutilized by the government would be
made available for use by private corporations.
The BSP has an ongoing review of its foreign borrowing policy in the context of
its ceilings on medium and long-term loans. After a board resolution in 2011, th
e BSP assessed the effectiveness of implementing a ceiling on the foreign loans
of both the public and private sectors.
As of end-September 2013, the Philippines total outstanding external debt amounte
d to $59.1 billion, 4.3 percent lower than end-September 2012 s $61.7 billion. By
BSP definition, external debt refers to all types of borrowings by Philippine re
sidents from non-residents that are approved/registered by the BSP.
BSP to review 2015 foreign borrowing cap
The Bangko Sentral ng Pilipinas (BSP) is preparing to review the proposed foreig
n borrowing ceilings for 2015 as part of its external debt management tool.
The BSP s International Operations Department has issued a September 1 reminder to
the private sector which includes banks, foreign parent companies and affiliate

s, to disclose next year s foreign borrowing plans. Resident entities borrow offsh
ore via the issuance of bonds or securities in the international capital markets
.
The BSP makes it mandatory to submit such plans to monitor the magnitude and timi
ng of foreign financing requirements of the economy which would help them in thei
r capital flows projections and its implications on the economy.
The central bank already monitor closely the foreign borrowing of the public sec
tor since any plans from the government to source offshore funds have to secure
a Monetary Board opinion and eventually, a BSP approval. For the private sector,
about $10 million is usually the threshhold for a BSP disclosure but the centra
l bank would still prefer to be informed of any loan even smaller than that amou
nt.
From the submissions of both the private and public sector of their planned fore
ign loans, the BSP could estimate what it called an indicative funding requiremen
ts for any given year.
Based on Monetary Board documents, they have instructed the review of the BSP s fo
reign borrowing policy in the context of the ceiling on medium and long term for
eign loans.
The use of annual ceilings on foreign loan approvals has proven effective in cont
rolling the side of debt, the BSP said in a report.
As external debt indicators remained within manageable levels, the report said t
his will give foreign investors the confidence to invest in Philippine debt inst
ruments. Also, the sustained growth of the economy and the investment grade sove
reign ratings allowed a substantial lowering of borrowing cost and lengthening o
f maturity.
For this year, the BSP has imposed a foreign borrowing limit of $5 billion. This
is the second year that the central bank has capped foreign loans ceiling at th
is level.
BSP officials have noted that since 2012, the public and private sector s foreign
borrowing plans seem to favor sourcing their financing requirements from the dom
estic market despite the investment grade status.
As of end-March this year, Philippine outstanding external debt amounted to $58.
3 billion, lower compared to the same period last year of $59 billion. As a perc
entage of gross domestic product, the external debt is equivalent to 21.5 percen
t, an improvement from 22.8 percent in the previous year.