PH defers offshore borrowing

The government has shelved temporarily its plans to sell bonds abroad as it takes a wait-and-see stance to better gauge a jittery international market.

National Treasurer Rosalia de Leon INQUIRER FILE PHOTO

National Treasurer Rosalia de Leon said the Philippines would allow other emerging countries to go first in tapping the international market for funds this year.

De Leon explained that, after gauging how the bond issuances of other countries fared in the international market, the Philippines would then decide whether to sell its own bonds abroad.

In the past few years, the Philippines always would raise bulk of its foreign, commercial funding requirements in January. Treasury officials said doing the fund-raising activity in January—and going ahead of other emerging economies—allowed the Philippines to corner a substantial portion of demand for emerging-market assets.

But De Leon said the government would adopt a different strategy for this year.

She cited the need to take into account the US Federal Reserve’s decision to “taper” its easy money policy and its impact on global demand for emerging market assets and interest rates.

“The environment is different this time. We want to first see how the latest developments are being digested by the international market,” De Leon told reporters Monday.

“Tapering,” referred to in financial markets as the gradual withdrawal of stimulus funds by the US Federal Reserve, is expected to dampen demand for debt securities issued by emerging markets. This, in turn, could increase the cost of raising funds abroad.

Under the originally proposed Philippine borrowing program for 2014, the government was supposed to sell $1 billion worth of bonds in the international capital market to partially cover its total borrowing requirement for the year.

“If it would be too costly for us to borrow funds from abroad, then we would not,” De Leon said.

She said the government would monitor market developments in the coming weeks before making a decision over its borrowing plans for 2014.

De Leon said that, given the liquidity in the domestic capital market, there is no pressure to sell bonds abroad.

Under the 2014 fiscal program, the government is supposed to borrow a total of P715 billion to fund its expenditure requirements for the year.

Of the amount, 85 percent is supposed to be secured from domestic creditors while 15 percent will come from the international market.

Foreign borrowings are done through the sale of bonds offshore and/or securing of loans from development lending institutions, such as World Bank and Asian Development Bank.

De Leon said the Bureau of the Treasury so far would leave its options open as it monitors financial markets.