Philippines eyes Sukuk bonds

MANILA, Philippines — The government is exploring the possibility of issuing “Sukuk” or Islamic bonds to diversify the country’s investor base, according to the Department of Budget and Management.

DBM Secretary Benjamin Diokno said the possible issuance of Shariah-compliant securities, also known as “Sukuk” bonds, is being studied by the Department of Finance (DOF).

He said economic managers are considering to add this type of financial instrument in the administration’s financing strategy to enable Muslim investors to participate in the domestic capital market.

“The President’s commitment to the Muslim people is not lost on us, his economic managers. One important economic issue that we are looking into is the lack of access to Shariah-compliant financial instruments in the market,” Diokno said.

However, Diokno said the issuance of the bonds may take another year before becoming reality pending a bill that aims to enhance Islamic banking in the Philippines.

“I know there’s a bill in the House that will actually strengthen the Al-Amanah Bank structure, but that would probably take another year,” he said in a separate press briefing.

House Bill 8281, which seeks to amend the charter of the Al Amanah Islamic Investment Bank of the Philippines, has already been approved on second reading last Tuesday, while its counterpart, Senate Bill 668, remains pending.

The Bangko Sentral ng Pilipinas (BSP) said the measure would provide the legal framework that will enable the development of Islamic banking and finance in the country.

The government issues debt instruments to raise funds which will be used to finance the country’s fiscal deficit currently targeted at three percent of the gross domestic product (GDP).

In March this year, the government raised 1.46 billion renminbi ($230 million) from its maiden panda bond issuance, which fetched coupon rate of five percent.

It also sold ¥107.2 billion ($1.39 billion) worth of Samurai bonds last August, with maturities spanning three years, five years and 10 years. The transaction yielded a weighted average spread of 34.7 basis points above benchmark.

The Bureau of the Treasury (BTr) earlier said the government is still considering to float Marawi bonds, US-denominated global bonds and floating rate notes before the end of 2018.

For this year, the BTr is programmed to borrow P986 billion from domestic and foreign lenders, and this will increase to P1.19 trillion in 2019.