MANILA, Philippines - The weakening peso may cause the country to incur more costs for paying foreign-denominated debt but National Treasurer Rosalia de Leon gave her assurance the government is implementing liability management practices to counter the impact of a weak peso.
“It has an (adverse) impact on our interest payments. But there will be offseting factors,†De Leon told reporters.
The peso last week plummeted to a more than three-year low against the dollar as improving US economic data propped up the greenback. The local currency closed at 45.12:$1 on Thursday, its weakest level after closing at 45.13:$1 on Aug. 26, 2010.
The peso finished back at the 45-per-dollar band last Jan. 15, due largely to market’s reaction to the Fed’s scaling back of stimulus.
Based on government estimates, interest payments on foreign-denominated debt rises by about P2 billion for every P1 depreciation against the dollar.
De Leon said recent efforts in managing the country’s finances will offset the impact of the peso’s weakening against the dollar.
“One is we are borrowing less this year [as compared to last year]. Second is we already retired some debts in the past so it (the amount of maturing obligations) will ease,†De Leon said.
“Then, we also have our switch (or bond exchange program), which is part of our debt liability management,†she continued.
Earlier this month, the country raised $1.5 billion through the sale of 10-year global bonds with a 4.2 percent yield.
The bulk or $1.08 billion of the amount were exchanged for dollar-denominated government securities maturing between 2015 and 2025, while the remaining $420 million were fresh funds.