MB okays $1-B borrowing binge ahead of polls

The Bureau of Treasury said yesterday the plan to raise an additional $1 billion worth of foreign borrowing before the end of the year has been approved in principle by the Bangko Sentral ng Pilipinas (BSP), paving the way for its final foray into the international credit market before the May elections.

National Treasurer Sergio Edeza told reporters yesterday that the borrowing plan has been approved by the Monetary Board (MB) which supported the plan that would boost the country’s international reserves.

According to Edeza, the approval was a signal for the government to start exploring its options for the $1-billion borrowing, although no plans have been firmed up.

"It’s always good to have money even before the need arises," Edeza said. "Its better to be full-funded ahead of time, but we are being very opportunistic."

The Arroyo administration decided to undertake a final $1-billion fund-raising from the international credit market to front-load its 2004 external borrowing, hoping to avoid the crunch that is expected to build up towards the May elections next year.

The government just concluded a successful $1.5-billion global bond offer last week, but officials said they were still looking for opportunities to borrow ahead of the elections, probably before the end of the year.

Edeza told reporters that the government is eyeing another $1-billion borrowing although it has not been decided whether it would be in the form of a straight loan or the issuance of more global bonds.

"Definitely we don’t want to go to the market right before the elections," Edeza said. "We have to see if we can get good terms and if there is still an appetite in the market for us."

The success of the government’s recent bond float, according to Edeza, was the result of the pent-up demand for Philippine instruments. "We had announced early on that we planned to issue bonds but we didn’t do it right away so there was a build-up in demand," he said. "That’s why there was such a strong response to our last offer."

However, Edeza said there was no pressure to borrow especially after the success of the government’s bond offer.

The government’s borrowing requirement for 2004 is estimated at $1.8 billion which would help finance about $7 billion worth of various obligations of the government and government-owned corporations scheduled to mature within the next 16 months.