Gov't expects billions in savings

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Gov't expects billions in savings
Posted: 3:04 AM Jan. 23, 2006
Michelle V. Remo
Inquirer

(Published on Page B14 of the January 23, 2006 issue of the Philippine Daily Inquirer)

THE GOVERNMENT EXPECTS TO GENERATE billions of pesos in savings from debt servicing this year, as the peso strengthens against the US dollar, while interest rates are seen to decline further.

In a sensitivity analysis, the Department of Finance said the national government could save P4.369 billion this year for every unit of peso appreciation, and another P5.137 billion for every percentage-point decline in interest rates.

Under the government's 2006 fiscal program, it is set to pay P381.7 billion worth of maturing foreign and domestic debts.

The 2006 fiscal program assumed that the average exchange rate would settle at P56:$1, and that the benchmark 91-day Treasury bill rate would hit 8 percent.

Strong inflow of remittances from abroad--money mostly sent by overseas Filipino workers to relatives in the country--has propped up the peso against the dollar.

The peso is hovering at the P52:$1 level since the beginning of the year, On Friday, it closed at P52.96:$1. The Bangko Sentral ng Pilipinas said that there is even a possibility that the peso would hit the 51 to the dollar level.

T-bill rates have also been sliding due to the high level of market liquidity, which increases demand for government securities, and the reduction in the supply of T-bills and bonds because of the government's dwindling budget deficit.

The Bureau of the Treasury earlier announced that the government's domestic borrowing program for the first quarter of this year was set at P75 billion, or 47 percent lower than the P142 billion borrowed during the same period of last year.

T-bill rates dropped across all maturities last week, with the 91-day tenor breaching the 5-percent mark and falling to 4.863 percent, the lowest since August 2002.

The government had set a budget deficit ceiling of P180 billion last year, but the Treasury said the actual deficit figure could be lower than P160 billion.

The Department of Finance, head agency of the Treasury, will announce the official 2005 budget deficit figure today.

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