Gov’t not disadvantaged by PEACe bonds, says former DoF official

Taxpayers were not disadvantaged by the decision of the government to issue P10 billion worth of the so-called PEACe bonds a decade ago as it was a private financial institution that bore the cost of payment to Code-NGO.

According to former Finance Undersecretary Romeo Bernardo, the 12.75-percent original yield on the PEACe bonds was favorable to government and that it was Rizal Commercial Banking Corp. (RCBC) that paid for the P1.8-billion windfall that was enjoyed by Code-NGO “by suffering an inordinately low yield on this instrument when [the bank] bought the bonds on a secondary basis.”

Bernardo, who is also a member of the Foundation for Economic Freedom, first issued his position paper in December last year. This paper has been circulating again in the light of the current controversy.

He said it was unclear whether RCBC’s decision to pay Code-NGO the large sum resulted from philanthropy and social spirit, miscalculation or contractual constraints. But he pointed out that the bank would have been entitled to participate in an auction for such bonds issued by the government with or without the presence of the controversial NGO.

“Looking at this issue in its entirety, we believe that it was inappropriate, if not outright wrong, for Code-NGO to have attempted to conduct this transaction on a negotiated basis, as they themselves have admitted,” he said.

Bernardo explained, however, that if there was no bond auction conducted, the government would have ended having to bear the cost of the Code-NGO windfall of P1.8 billion, instead of RCBC.

“Thus, instead of being pilloried and maligned, the DoF [Department of Finance] and the BTr [Bureau of Treasury] deserve our congratulations and commendation for having resisted the strong overtures of Code-NGO to conduct a negotiated sale,” he said. “In particular, we have to thank [former] National Treasurer Sergio Edeza for having been so clear and unswerving in his position on the matter, and for taking only the highest interest of the Republic into account in his actions.”

“Clearly, the government did not lose a single centavo in the transaction, thanks to their efforts,” Bernardo said.

The P10 billion worth of PEACe bonds were issued by the government a decade ago as part of its borrowing plan. The entire issue was bought by RCBC in an auction, and resold to the secondary market, with the profits being turned over to Code-NGO.