Samurai bond sale pushes end-August debt to new high of P7.104T

Finance Secretary Carlos Dominguez III. Malacañang file photo / TOTO LOZANO

The sale of yen-denominated samurai bonds in August further raised the national government’s outstanding debt to a new high of P7.104 trillion.

The latest Bureau of the Treasury data released Friday showed that the government’s outstanding liabilities as of August inched up 0.9 percent from P7.044 trillion at end-July, as well as jumped by a faster 10.5 percent from P6.432 trillion during the same eight-month period last year

At end-August, foreign debt rose 3.6 percent month-on-month and 11 percent year-on-year to P2.531 trillion.

“The growth in external debt was due to net availments of foreign loans amounting to P72.3 billion, including the successful issuance of samurai bonds. Currency fluctuations on both dollar and third-currency denominated debt added P14.48 billion and P1.1 billion, respectively,” the Treasury explained in a statement.

Last August, the Philippines sold 154.2-billion yen (about P74.4-billion) worth of samurai bonds across three tenors, the largest issuance of yen-denominated securities thus far this year.

The Philippines issued 107.2 billion yen in three-year bonds at a coupon rate of 0.38 percent; 6.2 billion yen in five-year debt paper at 0.54 percent; and 40.8 billion yen in 10-year IOUs at 0.99 percent.

This ended the eight-year absence of the Philippines in the samurai bond market, as the last issuance was in 2010.

Finance Secretary Carlos G. Dominguez III had said they wanted to tap the samurai market at least every two years.

Foreign liabilities nonetheless accounted for a lower 35.6 percent of the total end-August debt stock, as locally sourced borrowings maintained their bigger share.

In August, domestic debt declined by 0.6 percent month-on-month to P4.573 trillion, which the Treasury attributed to “net redemption of government securities amounting to P27.77 billion, slightly offset by the depreciation of the peso that increased the value of onshore dollar bonds by P160 million.”

The peso further weakened to 53.475:$1 that month from 53.16 against the US dollar last July, the Treasury noted.

As of end-August, domestic liabilities grew 10.1 percent year-on-year.

During this week’s Philippine Economic Briefing in London, Budget Secretary Benjamin E. Diokno reiterated that “the rule of thumb, as you know, is that a country with a debt-to-GDP [gross domestic product] ratio below 60 percent is fiscally sound.”

“The Philippines is comfortably below that,” Diokno added, citing that the general government debt-to-GDP at end-2017 was 36.6 percent.

“Those who say we are walking into a debt trap ought to look more closely at the actual terms of the loan contracts we sign. The economic build-up is supported by a sound financing strategy. Our financing mix continues to be inclined towards the domestic market to avoid vulnerability from external markets,” Dominguez, for his part, said.

“Notwithstanding the increased borrowings to finance investments, our debt-to-GDP ratio is expected to fall from 42 percent in 2017 to 38 percent by 2022,” Dominguez told UK investors. /jpv