Gov’t not likely to borrow till after ’04 polls

After raising $1.5 billion from its recent global bond offering, Finance Secretary Jose Isidro Camacho said yesterday the government can afford to stay out of the credit market until after the May elections in order to avoid the high cost of borrowing due to political risks.

According to Camacho, the government was able to build up enough cash to pre-fund part of its 2004 budget requirements and may not find it necessary to immediately go back to the market to borrow the remaining portion of its requirement for next year.

The Arroyo administration had originally estimated its external borrowing requirement for 2004 at $1.8 billion.

"We were originally planning to get at least $250 million from our recent bond offer," Camacho said. "This was just enough to finance our requirement for the remainder of 2003."

However, Camacho said the market response was strong enough for the government to decide to increase its bond offer to $1.5 billion, generating enough funds to finance the remainder of its requirements for the year and pre-fund part of its 2004 budget.

The Philippines launched and priced the re-opening of its global bond issue to $750 million and opened another series due 2025 by $300 million through its joint lead managers Hong Kong and Shanghai Bank, Morgan Stanley and UBS Warburg.

According to Camacho, the government was also satisfied by the price that it got for both bond floats and the proceeds filled up the $1 billion that the Department of Finance wanted to raise before the end of the year.

"I’m particularly proud of the price we were able to get," Camacho said. "In terms of front-end fees, this is by far the cheapest borrowing we have been able to get."

This latest borrowing adds another $1.5 billion to the country’s total outstanding external debt. As of June this year, the volume had increased by $300 million to $56.1 billion as the peso depreciated against the dollar and the euro during the second quarter of the year.

About $7 billion worth of various obligations of the government and government-owned corporations are scheduled to mature within the next 16 months, causing concern among finance and monetary officials.

A senior Monetary Board official revealed that the amount of maturing obligations for the remainder of the year was "slightly over $5 billion," including the maturing obligations of the National Power Corp.

In 2004, the National Government’s maturing obligations will amount to $500 million, but the official said the obligations of government owned and controlled corporations like Napocor would add another $1.5 billion.

According to the official, Napocor was particularly problematic since it no longer has access to the credit market.

At this level, the Bangko Sentral ng Pilipinas (BSP) had earlier admitted that the government would have to not only service its existing debt but make a net repayment of at least part of the obligations.

BSP Governor Rafael Buenaventura said this comes at a time when the need to repay some of the country’s foreign borrowing was becoming more urgent in order to keep the debt portfolio within manageable levels.

"There has to be a net repayment of our foreign borrowing," Buenaventura said. "If foreign direct investments and exports come strong, it will support net repayment."

According to Buenaventura, this would depend largely on the country’s balance of trade since there would have to be enough foreign currency to do this. Import expenses have to leave just enough foreign exchange to repay some of these borrowings.