Loans Cap

Limits set on foreign loans
Daxim L. Lucas
Inquirer News Service

REGULATORS HAVE imposed limits on the amount of foreign loans that the government and private companies will be allowed to borrow in any given year, the Bangko Sentral ng Pilipinas (BSP, the central bank) revealed Monday.

Te policy is meant to ensure sufficient supply of dollars in the financial system for repayment of maturing foreign debt, BSP Governor Amando Tetangco said.

In particular, he said, the BSP's policy-making body, the Monetary Board, wants to prevent a repeat of the 1983 debt crisis when the country ran out of dollar reserves to pay off maturing short-term loans.

Tetangco expressed confidence that "prudent monitoring" of the country's external debt levels will prevent a repeat of a debt moratorium.

"Short-term debts account for only 10 percent of the country's external debt," he told reporters during an economic forum. This was in contrast with the situation in the early 1980s when the bulk of the country's public and private borrowings were short-term commercial loans, he said.

He also noted that the bulk of the country's foreign debt of $55.3 billion has an average maturity of 12.7 years, and that foreign debt is now equivalent to only 62.39 percent of the gross domestic product as compared with 71.29 percent in 2002.

Nonetheless, the BSO is "gathering the borrowing plans of the public and private sectors, and we will assess if we can accommodate it," Tetangco said.

The BSP's policy-making body, the Monetary Board, has a legal mandate to screen and approve every foreign loan entered into by public and private entities.

Tetangco said that so far no public or private borrowing initiatives had been turned down. He said approvals sought from the Monetary Board were "well within the limits."

Companies that borrow in dollars without the central bank's approval are barred from buying dollars from the banking system to pay for these loans when they mature. With INQ7.net