While pressure on interest rates is building up, the Philippine government is expected to maintain its policy of low interest rates to stimulate market recovery. According to Finance Secretary Jose T. Padro, "banks are still not lending as aggressively," as the should.
He noted that most are still suffering from property losses and that "it is still a market not recovering."
Bangko Sentral ng Pilipinas (BSP) Gov. Rafael Buenaventura said the pressure for the interest rates to go up is indeed building up due to an expected rise in US interest rates.
However, Buenaventura said, the National Government still has a comfortable cash position and could therefore afford to continue rejecting any high bids during the weekly Treasury bill auction.
Pardo agreed that the country is in a unique situation in that even if there is a push for higher interest rates, it is still comfortable and still wants to encourage the market to recover.
The Philippines is also set to test the waters in the international capital market in June.
The Estrada government had planned to source most of its borrowings this year from the international market so as to avoid pressure in the domestic market. However, a recent downward trend for all emerging markets has made it slightly more expensive to tap the international market at the moment.
The Philippines economic team, together with President Estrada, is scheduled to visit Europe in June and, according to Pardo, it may be the best time to check if there has been an improvement in international market perception of a planned Philippine Eurobond offering.
But, there is no pressure to do so if the current spreads continue to remain wide, Pardo said.
Aside from the Eurobond, the Philippines is also looking into a planned Samurai bond offering where the market appears better.
But before the government taps the Japanese market, Pardo said, a planned offering by the Philippine National Oil Co. may proceed first.