By JIMMY CALAPATI

A weaker peso and more domestic borrowings pushed up the Philippine government’s outstanding debt by 0.9 percent to P3.964 trillion at end-June from P3.927 trillion the previous month, the Bureau of Treasury said yesterday .

This is 4.8 percent higher from end-June 2007 total of P3.782 trillion.

More than half or 58 percent of the government’s debt, equivalent to P2.303 trillion, was owed to local creditors, while the rest was owed to foreign lenders, the Treasury said.

Domestic debt rose 0.3 percent in June from May, and the value of foreign debt climbed 1.9 percent in the same period, due to the depreciation of the peso against the US dollar.

The peso, Asia’s best performing currency last year, has reversed course and is now one of the region’s major laggards, losing almost 12 percent so far this year.

The rise in the government’s total debt was muted due to its net loan repayments worth P3 billion in the period and the P2-billion decline in contingent debt, the Treasury said.

Contingent debt, mainly government-guaranteed debt issues by state-owned and state-controlled firms, slid to P524 billion in June from P526 billion in May.

Budget deficit this year is expected to reach P75 billion this year, or 1 percent of gross domestic product, from P12.4 billion last year.

National treasurer Roberto Tan said the government may forego its planned additional foreign commercial borrowing of $500 million to $750 million this year and may cut its domestic borrowings for the rest of 2008 given its healthy cash position.

But he said the government would still assess its cash position including collections of the Bureau of Internal Revenue and the Bureau of Customs, as well as proceeds from the sale of assets before making a final decision on the foreign commercial borrowing either this month or early next month.

The Philippines is scheduled to borrow P438.6 billion this year to finance the deficit and at the same time service its maturing obligations.

Of the total amount, about P332.7 billion would be sourced from domestic creditors while P105.9 billion would come from foreign sources.

The government earlier said it will cut by half its commercial borrowing program to $500 million from $1 billion as part of the directive of President Arroyo to cushion the impact of the strong peso on overseas Filipinos and exporters.

The government also has abandoned its commitment to balance the budget this year and postpone fiscal consolidation back to the original 2010 schedule under the Medium Term Philippine Development Plan due to adverse external developments brought about by rising oil and food prices.

The government now expects to incur a budget deficit of P75 billion or one percent of gross domestic product this year and P40 billion or 0.5 percent of GDP next year.