The Treasury bureau said government gross borrowings fell 36.22 percent in the first two months of 2025 with a sharp drop in domestic loans, behind which an analyst saw a government move to optimize costs and manage refinancing risks.
Data released by the Bureau of the Treasury (BTr) on its website show that as of Sunday the government’s total borrowings in January to February 2025 amounted to P552.692 billion, from P866.573 billion a year earlier.
The current borrowing mix shows the government’s intent to optimize cost while managing refinancing risk, John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, told Malaya Business Insight.
The issuance of global bonds in February suggests that the government was taking advantage of still-manageable external market conditions before further volatility or tightening sets in, he said.
“With uncertainty surrounding global monetary policy and geopolitical developments, front loading foreign borrowings early in the year gives the government flexibility and diversifies its financing sources,” Rivera added.
Of the government’s total gross borrowings, P293 billion were owed to local lenders and P259.692 billion to foreign creditors.
Loans from domestic sources shrank 63.38 percent from P800.186 billion a year earlier.
On the other hand, borrowings from foreign lenders rose 291.18 percent from P66.387 billion recorded in January to February 2024.
Of the total domestic borrowings, P270 billion were obtained through fixed-rate treasury bonds, and P23 billion through treasury bills.
External borrowings consisted of P11.438 billion in project loans and P56.289 billion in program loans. The government also raised P191.965 billion from its triple-tranche global bond issuances in February.
In the same two-month period last year, the government did not issue global bonds, but floated domestic retail treasury bonds (RTB), which generated P584.861 billion in February 2024.
In February 2025 alone, the government’s gross borrowings fell 48.82 percent to P339.551 billion from P663.422 billion a year earlier.
Domestic borrowings dropped 78.62 percent to P140.8 billion from P658.681 billion a year earlier, while funds owed to external sources significantly increased to P198.751 billion from P4.741 billion in February 2024.
Rivera said the decline in domestic borrowings likely reflected a temporary slowdown in local issuances, particularly since there was no large RTB issuance during the first two months of 2025.
“It also signals that the government may be avoiding crowding out private sector credit or waiting for better yield conditions locally before ramping up issuance,” he said.
“The strong uptake in global bond issuances indicates that investor sentiment toward PH remains solid. Tapping the international market helps preserve liquidity at home and reduces pressure on domestic yields,” Rivera added.
Long-term loans and foreign exchange funding could offer lower rates, but at the same time they expose the country to exchange rate risks, especially if the peso weakens further, the PIDS senior research fellow said.
Moving forward, it is likely that there would be less foreign borrowings and correspondingly more local borrowings to better manage foreign exchange risks in foreign currency borrowings, said Michael Ricafort, Rizal Commercial Banking Corp. chief economist.
“Lower US and local interest rates would give the national government better leeway to hedge its borrowing to finance the budget deficit and in refinancing maturing debt … as lower interest rates and stronger peso recently (best in six months) would help reduce financing costs,” the RCBC chief economist said.
“There would also be a need for tax and fiscal reform measures to narrow the budget deficit and better manage the country’s debt and fiscal management,” he added.
Based on the Budget of Expenditures and Sources of Financing for 2025, the government’s gross borrowings this year are projected to hit P2.55 trillion.
The amount is slightly lower than the P2.565 trillion in gross borrowings posted in 2024.
Of this year’s proposed borrowings, P2.04 trillion is expected to be from local lenders and P507.41 billion from foreign creditors.
