Gov’t to cut down on foreign borrowings

The government is looking to reduce its foreign borrowings to minimize exposure to foreign exchange risks, according to Department of Finance (DOF) Secretary Ralph Recto.

In a recent briefing, Recto explained that while the government is considering various bonds such as Euro, Yen, Sukuk (Islamic bonds), and Dollar bonds, the aim is to limit foreign borrowings to a maximum of 10 percent.

“We’re considering all of them but we want to limit our foreign borrowings. We want to reduce that. So next year, I think it’s 75-25. Possibly even 80-20,” Recto said.

Gross borrowings are projected to reach P2.570 trillion this year, with a slight decrease to P2.55 trillion in 2025. The government intends to focus more on domestic borrowing, planning for a mix of 75 percent domestic and 25 percent foreign this year, and shifting to 80 percent domestic and 20 percent foreign from 2025 to 2028.

“I think the plan is to reduce that to 90-10. Not next year but over the medium term,” Recto said. “Maybe even later [than 2028]. I don’t think we can do it all the way to 2028. But let’s say if you have a 70-30 borrowing mix, then 75-25, it will be 80-20, and then 85-15. So, what is the end goal? To reduce your foreign exchange risk to 10 percent.”

Recto mentioned that while the 90-10 borrowing mix is expected to be implemented by the next administration, “the plan is there and we set that in motion.”

On bond issuances, Recto revealed that the government is considering issuing Euro and/or Dollar bonds in the first half of 2025. He also noted that the Bureau of the Treasury (BTr) is planning to include Sukuk (Islamic bonds) and Yen-denominated bonds in its financing strategy next year.

“Because there’s appetite, appetite for the Middle East. You want more people buying our bonds, our notes, and so on and so forth. If they’re willing to finance government operations, why not,” Recto said.

Last year, the Philippine government raised USD1 billion by issuing its first Sukuk bonds. For Yen-denominated bonds, Recto emphasized that this move would help bring the Philippines to the attention of Japanese investors.

“I think it’s an opportune time that the Yen is depreciating. So, pabor sa atin yun (so that’s in our favor) if we borrow from them, they’re depreciating you know. But more importantly, I think you want to be on the radar screen of investors from Japan,” Recto added.