Phl to raise $500 million via global notes

MANILA, Philippines - The Aquino administration may tap the foreign debt market in the second half of the year possibly for at least $500 million worth of new global peso notes, Finance Secretary Cesar Purisima said yesterday.

 “After June, we will look at the market opportunities,” Purisima told The STAR.

He said the Department of Finance (DOF) would be studying the viability of borrowing anew on the back of a small budget deficit as of end-April.

The government still needs to spend given the need to boost economic growth.

The year-to-date budget deficit of the government is only P2.885 billion, just one percent of the deficit ceiling set for the year of P280 billion or 2.6 percent of gross domestic product, an indication that the government has yet to fully accelerate spending.

At the same time, Purisima said the government is not closing its doors on any foreign borrowings because of the need to boost expenditures.

“We will continue to accelerate expenditures,” he said.

He said tapping the foreign debt market is likely to happen after the government concludes the fund-raising activity for the Power Sector Assets and Liabilities Management Corp. (PSALM).

The government is eyeing to borrow up to P40 billion for PSALM by mid-June. The amount represents half of the roughly P80 billion funding needs of PSALM for the year.

“We’re doing the PSALM first,” he said.

Purisima also said the government is also preparing for a debt swap in the second half of the year.

The Finance chief said that for the swap, the government plans to issue global peso notes and swap this with expensive sovereign bonds.

“We plan to use GPN and swap this with expensive ROP bonds. We don’t know when but we’d like to do that,” he said.

GPNs are denominated in peso but issued offshore.

The Philippines first issued global peso bonds in September 2010, the first in Asia to sell bonds abroad in its own currency.

It sold $1 billion in 10-year global peso bonds in September 2010 and $1.25 billion in January 2011.

The issuance of peso-denominated bonds is among the new initiatives undertaken by the new administration to better manage government debt.

Purisima believes that reducing the foreign-currency component of the government’s debt would help cushion the economy from foreign exchange fluctuations.

The move has been recognized positively by global credit rating agencies.

The Philippines, Asia’s largest sovereign issuer, has not issued a GPN yet for this year.

In January, it borrowed $1.5 billion from the foreign debt market through the issuance of dollar-denominated 2037 bonds.

The January bonds attracted $12.5 billion worth of offers.

The government plans to borrow $4.02 billion from external sources this year, lower than the programmed $4.5 billion for last year, according to the latest data from the DOF.

Of the $4.02 billion, the government plans to borrow $2.25 billion to $2.5 billion from the commercial debt market and to borrow $1.77 billion worth of program and project loans.