By MAX ESTAYO

Finance secretary Margarito Teves yesterday said that the national government is now discussing with foreign lenders its plan to prepay costly loans including those incurred by government owned or controlled corporations.

Teves said the DOF will increase domestic, peso-denominated borrowings to 70 percent of total borrowings in 2008 from about 67 percent this year.

Both measures will hopefully temper the strength of the peso, which is affecting exporters and overseas Filipino workers, he said.

The peso has risen over 18 percent against the dollar this year.

The government’s last prepayment was in March involving $126 million of its remaining Brady bonds.

It prepaid $700 million of its external debts last year, using the country’s healthy stock of dollar reserves. Including those of the central bank and the private sector, the country prepaid a total of $4.4 billion last year, the first in history.

For the first nine months, the government had prepaid a total of $130 million. For the period, the country prepaid a total of $2.55 billion, including the central bank’s $810 million and the private sector’s $1.47 billion.

The government is careful with pre-terminating its debts to avoid penalties. Unlike the central bank, it has no debts that have call options, so it can’t prepay even if it wants to.

However, the International Monetary Fund, at the conclusion of its annual Article IV consultations with the Philippines Tuesday, said the government should consider prepaying more to take advantage of the strong foreign-exchange inflows.

In the meantime, Teves said the DOF would seek the approval of the Development Budget Coordination Committee Friday for the government’s planned borrowing mix of 70-30 in favor of domestic debts next year.

This would mean an additional P20 billion to P240.7 billion in domestic borrowing from P220.7 billion under the earlier 64-36 mix.

External borrowing would then be lower by the same amount to P105.4 billion from P125.4 billion.

The government is borrowing a total of P346 billion in 2008, P35 billion lower than this year, as it expects to balance its budget by then.

Teves said the P20 billion may be chipped off from either the commercial borrowing or project loans from confessional lenders.

Teves said other measures meant to reduce the upward pressure on the peso include the issuance early next year of high-yielding bonds for overseas Filipinos, and reduction of remittance fees of state-owned banks.

In November, Teves said Land Bank of the Philippines cut its remittance charge in its San Francisco, California branch by $4, lowering the cost of sending money to $6-$9 from $7-$13.

"These measures can directly assist in slowing down the peso’s appreciation against the dollar or provide overseas Filipinos with opportunities to increase interest income or reduce remittance costs," Teves said.