RP posts hefty savings due to strong peso
The Philippine Star - December 26, 2007
The steady appreciation of the peso against the dollar during the first 11 months of the year has allowed the government to save billions of pesos in interest payments.
The government booked P33.2 billion in interest savings from January to November this year and P1.5 billion in savings in November alone due to the continued strengthening of the local currency against the greenback, Finance Secretary Margarito Teves said over the weekend.
Estimates by the Department of Finance (DOF) showed that the Philippines saves as much as P4.2 billion in debt service requirement for every P1 appreciation against the US dollar and another P5.1 billion for every percent decline in domestic interest rates.
DOF data showed that interest payments fell 12.9 percent to P255.1 billion during the 11-month period from the P292.2 billion recorded in the same period last year.
Teves said that aside from the appreciation of the peso against the dollar, the government also benefited from better-than-expected market rates.
Government economic managers expect the local currency to continue with its rapid increase against the dollar in 2008.
The inter-agency Development Budget Coordination Committee (DBCC), the group that sets the country’s economic targets, expects the peso to range from P46 to P48 against the dollar this year from the original assumption of P48 to P50 against the dollar and further to P42 to P45 against the greenback in 2008.
Despite the savings during the 11-month period, however, the Philippines still has to service billions in debts to various lenders.
The government has earmarked P601.7 billion or 9.1 percent of gross domestic product (GDP) to service foreign and local debt this year.
Nonetheless, this is 30 percent or P253 billion lower than last year’s P854.4 billion or 14.2 percent of GDP.
Of the total amount allocated to service its debt this year, P303.3 billion would be used for interest payments while P298.4 billion of GDP would be used to service principal loans.
The Philipines hopes to contain the budget deficit at P63 billion this year but indications are strong that the government may end the year with a much stronger fiscal position.
Privatization of state-owned assets have reached P90.6 billion as of end-November, allowing the government to post a surplus of P12.6 billion in the first 11 months of the year.
In November alone, the monthly surplsu was P54.1 billion, due mainly to the P47 billion windfall from the sale of its remaining stake in PNOC-Energy Development Corp.
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