Philippine says ahead of 2011 deficit target

MANILA: Philippine Finance Secretary Cesar Purisima said on Thursday the government was well on track to meet its target of cutting the budget deficit to 3.2 percent of GDP this year, even as spending picked up after a slow start to 2011.

Lower-than-projected spending helped the government post a budget surplus of 26.258 billion pesos ($605 million) in April, and a surplus of 61 million pesos for the first four months of the year.

"Given where we are right now, even if we catch up with spending, we are still ahead of our plan in terms of deficit," Purisima said shortly after Fitch Ratings upgraded the Philippines' credit rating to within one notch of investment grade.

Government spending was well below target in January-April, but officials have said it has picked up since then. Data for May, which was set to be released on Friday, will be released next week, the government said.

The government cut the budget deficit to 3.7 percent of GDP last year from 3.9 percent in 2009, and plans to trim it further to 2 percent in 2013.

Purisima also said the government intends to continue issuing global peso and dollar debt, even as it cuts the share of foreign debt in its total borrowing.

"We will continue doing GPN (global peso notes), dollar bonds to keep supply going," he said, adding the government was looking to bring down foreign borrowings to just 20 percent of overall borrowing mix by the end of its term in mid-2016.

The Philippines plans to launch an offer to swap shorter-dated local bonds for new 10-year and 20-year papers on June 28.

Purisima also said domestic liquidity remained ample and demand for loans was not enough to siphon off excess funds.

Last week the central bank said it would raise banks' reserve requirements by 1 percentage point from June 24 to counter liquidity pressures.

Copyright Reuters, 2011