THE MONETARY Board has given its go-ahead for an up to $2-billion offshore bond sale, highly placed government sources told the Inquirer.
While the approval of the country’s top monetary policy-setting body had already been secured, the special authority from President Aquino to borrow by issuing bonds overseas was “still being requested,” the sources disclosed, while declining to provide more details.
For 2016, the Bureau of the Treasury plans to issue $750 million in sovereign bonds.
Earlier, National Treasurer Roberto B. Tan said the government was looking at selling bonds offshore earlier than usual to secure funding for next year’s expenditures.
“We are hoping there is a window of opportunity before this year ends,” Tan told reporters last month.
However, a reliable source said: “[it] looks difficult for a transaction this year given the need to still undertake shelf filing with US SEC which can take three weeks at the earliest.”
According to Tan, the timing will depend on market conditions.
“We want to do it, but not necessarily by yearend if the market is not good,” he had said.
In the past few years, the Philippines tapped the offshore bond market early in the year.
For instance, the government sold $2 billion in 25-year bonds last January at a record-low coupon of 3.95 percent.
The bigger chunk of $1.5 billion was swapped to retire old debt paper previously issued at higher rates and maturing between next year and 2034, while $500 million was to be infused into the budget.
In case the government decides to borrow offshore before yearend, such exercise will constitute pre-funding for 2016 expenditures.
“If we complete this pre-funding, there may not be funding operations anymore from foreign commercial sources next year,” Tan had pointed out.
The National Treasurer had also said that the Treasury was still in consultation with banks and potential underwriters for the specifics of the bond sale, although in terms of tenor, “the longer, the better,” he had said.
In its yearend report on the 2014 national budget, the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) said that “in line with its liability management goals, the national government will continue to source the majority of its funding requirements from domestic lenders to help advance local capital market development as well as to reduce vulnerabilities to foreign exchange fluctuations.”
For this year, the DBCC had programmed a borrowing mix of 75-percent domestic, 25-percent external, “as ample domestic liquidity will allow the government to source the majority of its financing needs from the domestic market,” it said.
“For the rest of 2015, the national government will borrow predominantly in local currency to meet its funding requirements, in line with the goal of reducing the country’s exposure to foreign currency volatility as well as the long term objective of developing the domestic capital market,” the DBCC said in a separate report.
The national government plans to borrow less next year and slash the debt stock to a record-low of 41.8 percent of the economy from the projected 44.7 percent this year.
“Because of our fiscal consolidation efforts, we will need to borrow only P674.8 billion to finance the projected P308.7-billion deficit, to amortize P347.7 billion of our maturing outstanding debt, while maintaining sufficient available cash,” the President’s budget message for fiscal year 2016 read.
Next year, domestic borrowing will comprise the bulk or 84.5 percent of the total. The government will source P570.2 billion from the auction of treasury bills and bonds in 2016.
The government will also borrow P104.6 billion from foreign sources—P54.1 billion in program loans, P17.1 billion in project loans, and P33.4 billion in bonds and other inflows.