RP to issue up to $1 billion worth of Samurai bonds

MANILA, Philippines – The Philippines is eyeing to issue $500 million to $1 billion worth of Samurai bonds to help finance a higher budget deficit for 2009, National Treasurer Roberto Tan said.

Tan confirmed the plan as he noted that the Philippines may sell Samurai bonds of at least $500 million or up to $1 billion which is the cap set by Japan.

The government would soon finalize the amount and is currently on the look out for underwriters.

Samurai bonds are yen-denominated bonds issued in the Japanese financial market by a foreign government or company.

Tan is optimistic that Japanese investors would find the Samurai bonds attractive because of the guarantee from the Japan Bank for International Cooperation (JBIC).

“That is a sweetener,” he noted.

In 2000, during the time of former Finance Secretary Jose Pardo, the government sold Samurai bonds to finance crucial infrastructure projects.

Japan earlier announced that it was setting aside Yen 6 trillion or $61.54 billion to help countries hit by the global economic crisis.

It announced during the recent Asian Development Bank (ADB) annual meeting in Indonesia that it would encourage developing countries’ efforts to regain access to international markets despite the worldwide turmoil.

Japan had agreed to provide guarantees totaling up to ¥500 billion for Samurai bonds issued in the Japanese bond market by Asian developing countries.

As part of this pledge, Japan had already agreed to help Indonesia issue up to $1.5 billion of Samurai bonds with JBIC providing a guarantee.

Aside from the issuance of Samurai bonds, Tan said other fund-raising options for the government include tapping the commercial market again in the latter part of the year or increasing the availment of official development assistance (ODA).

He stressed, however, that there is no final decision yet on the matter.

The government needs to raise funds to finance a swelling budget deficit, widened by the prolonged impact of the global financial turmoil.

The Development Budget Coordination Committee (DBCC) raised the budget deficit ceiling to a record level of P250 billion or 3.2 percent of gross domestic product instead of the revised P199.2 billion or 2.5 percent of GDP.