Dominguez: Another dollar debt paper sale before end-2018 to raise funds for infrastructure

The Philippines would again sell dollar-denominated bonds before this year ends to raise funds for the Duterte administration’s ambitious infrastructure program, Finance Secretary Carlos G. Dominguez III said Monday.

In a text message to finance reporters, Dominguez confirmed the government’s plan for another global bond sale by late third quarter or early fourth quarter of 2018.

The global bond issuance would finance infrastructure projects as well as settle maturing debt, Dominguez said.

Under its “Build, Build, Build” program, the government plans to roll out 75 “game-changing” projects, with about half targeted to be finished within President Duterte’s term, alongside spending over P8 trillion on infrastructure until 2022.

Volume

The volume and tenor of the IOUs have yet to be determined, Dominguez said.

The Finance chief said this was in anticipation of the US Federal Reserve’s moves. The US Fed already raised interest rates in March, with three to four more seen within the year.

In January, the Philippines sold a total of $2 billion in 10-year dollar-denominated global bonds at a coupon rate of 3 percent.

Last month, economic managers increased the share of foreign borrowings to the total financing program in the next five years, citing “good” rates being offered by China, Japan and South Korea to finance priority projects and programs.

Adjustment

The Cabinet-level Development Budget Coordination Committee (DBCC) in April adjusted the financing program to 65-percent domestic, 35-percent external for this year, from the 74:26 mix approved during its meeting last December.

For 2019 to 2022, the borrowing mix will be 75:25 in favor of domestic sources, even as there was an increase in the share of foreign borrowings from 20 percent previously.

As for the adjusted financing mix for the next four years, the DBCC had explained that the government was “diversifying its investor base and tapping new markets to meet its financing requirements at the most cost-efficient manner.”

Projection

Despite a programmed increase in foreign borrowings, “the debt-to-GDP [gross domestic product] ratio is also projected to continue its decline from 42.1 percent in end-2017 to as low as 38.9 percent in 2022,” according to the DBCC.

In March, the government issued 1.46 billion renminbi or about P12 billion in three-year panda bonds in China at a “tight” yield of 5 percent.

Due to the good turnout, the government is looking at another round of panda bond issuance, although not within this year, officials had said.

The government also plans to issue up to $1 billion in yen-denominated samurai bonds in Japan by September or October, with a roadshow to promote it scheduled next month.