PH sells $2.75B in global bonds

The Philippines sold $2.75 billion during its latest issuance of US dollar-denominated debt paper offshore, the Department of Finance (DOF) said on Thursday.

This developed as the Uni­ted Nations Economic and Social Commission for Asia and the Pacific (Unescap) said the share of the Philippines’ debt to the economy would climb by over 20 percentage points (ppts) compared to prepandemic levels in the next five years given the increasing borrowings to fight COVID-19.

In a report titled “An assessment of fiscal space for COVID-19 response and recovery in Asia-Pacific developing countries,” Unescap projected an above 10-ppt climb in the Philippines’ government debt-to-gross domestic product (GDP) ratio in the next two years from prepandemic base year 2019.

The debt-to-GDP ratio fell to a record-low of 39.6 percent last year, but weak revenues due to the pandemic-induced recession forced massive borrowings to finance the ballooning requirements to better respond to the health and socioeconomic crises inflicted by COVID-19.

The ratio had been projected by the government to jump to 53.9 percent in 2020, 58.1 percent in 2021 and 59.9 percent in 2022.

Unescap’s estimates showed that medium-term change in the Philippines’ debt-to-GDP will breach 20 ppts between 2021 and 2025.

“Increased deficit finan­cing, together with the economic slowdown, will contribute to higher government debt-to-GDP ratio; among-Asia-Pacific developing countries, it is projected to rise from 41 percent of GDP in 2019 to 47 percent in 2020 and 49 percent in 2021,” Unescap said.

“Compared to the global financial crisis of 2008, which also had a significant impact on the region’s debt position, COVID-19 has affected a much larger group of countries; debt ratio would rise in 40 out of 43 countries in the region, compared to 24 countries in the wake of the global financial crisis,” Unescap added.

In the case of the Philippines, the DOF said it was taking advantage of sustained confidence by debt markets here and abroad in the country’s solid macro fundamentals despite the pandemic, referring to the strong response to the global bonds sold across two tenors of 10.5 and 25 years at low rates last Wednesday.

In a statement, the DOF said the shorter tenor fetched a coupon rate of 1.648 percent, while the longer IOU had a 2.65-percent yield.

“With only a few weeks left before the end of the year, the [Philippines] was able to take advantage of the constructive market backdrop post-US elections and announce the transaction on Wednesday. Positive news on the COVID-19 vaccine trials over the past couple of weeks have created strong inflows in Asia-Pacific credit markets, which illustrates the [Philippines’] ability to capitalize on favorable market dynamics,” the DOF said.