No plan to borrow abroad yet – Tan

MANILA, Philippines - Diverting from usual practice, the Aquino administration is unlikely to borrow offshore early in 2016 as financial volatility persists over the impending interest rate hike in the US.

National Treasurer Roberto Tan said in a text message last Friday “There is no firm plan at the moment” for a foreign borrowing exercise in early 2016.

The government, however, is in “regular consultation” with its bank advisers to determine “market opportunities” for an issuance, he said.

But when asked how a US Federal Reserve action by end-2015 affect state borrowing plans, Tan said: “We will be guided by our program and implement it most advantageously under future market conditions.”

Under Aquino, the Philippines has been an active foreign borrower early in fiscal year since 2011, floating bonds to finance government financing requirements.

In January 2011, it issued $1.25 billion in global peso bonds, which were followed by a higher $1.5 billion offer in March that year. In January 2012, the country issued another $1.5 billion worth of 25-year bonds.

The following year, Manila dropped foreign borrowing plans as domestic market provided it with enough liquidity. Its return to the offshore market in 2014 was marked by a $1.5-billion dollar bond offer in January.

The practice continued in January this year when the government raised another $2 billion from 25-year global bonds. This coincided with a limited offer of 2016 and 2034 dollar papers of which $1.5 billion were awarded.

Two weeks ago, Tan said the Philippines, one of the most active issuers of foreign debt among emerging markets, is taking an “opportunistic stance” in issuing foreign debt papers amid the looming Fed interest rate hike.

The US central bank is still highly anticipated to raise rates by its last meeting in December, even after foregoing such action last week. Higher US rates appeal to yield-seeking investors attracted to the US as a safe haven.

The mere prospect of higher rates has created volatility across emerging economies, including the Philippines, as capital flows out of the region. For instance, the benchmark 91-day Treasury bill averaged 1.47 percent as of Oct. 20 from 2.10 percent in end-August and 2.20 percent in end-July.

The peso, on the other hand, has swung between 45 and 47 level versus the dollar this year. It has lost about four percent of its value to date against the greenback after closing at 46.82 last Friday.

“We are giving ourselves an opportunistic stand on this. When there is a good window, when there is very good opportunity, then we will consider it. Right now, there’s no plan yet,” Tan earlier said.

“We’ll have to watch how the market is behaving from here on,” he added.

The government borrows from local and foreign markets to finance its budget deficit and pay existing debts.

For 2016, the government plans to borrow P747.8 billion to bridge a budget deficit programmed to hit two percent of economic output under a proposed P3.002-trillion outlay.