PH eyeing more loans through dollar bond sale in 2021
MANILA, Philippines—The Philippines will again issue US dollar-denominated global bonds to raise funds for a protracted fight against the COVID-19 pandemic, Finance Secretary Carlos Dominguez III said on Tuesday (April 6).
“We will tap the US bond market before rates skyrocket,” Dominguez told Bloomberg TV, but he did not say how much or when the bonds would be offered.
The Philippines last week raised about $500-million worth of yen-denominated samurai bonds at zero coupon.
In 2020, the Philippines ventured into dollar bonds twice for its financing needs.
The national government had programmed a total of P3.03 trillion in borrowings this year, of which the bulk will be from local sources. External financing—which included offshore bond issuances and foreign loans from multilateral lenders as well as bilateral development partners—will contribute a gross amount of P442.4 billion.
Dominguez said the government planned to wind down the P540-billion short-term and zero-interest loan extended by the Bangko Sentral ng Pilipinas (BSP) “sometime late this year or early next year, depending on the situation, of course.”
While borrowings filled the gap at a time when the pandemic-induced recession weakened revenue collections, Dominguez said the Philippines will cap debt to 60 percent of gross domestic product (GDP).
This year’s additional borrowings would hike the debt-to-gross domestic product (GDP) ratio to a new high of 57 percent.
A measure of a country’s capability to pay its obligations, debt-to-GDP climbed to a 14-year high of 54.5 percent in 2020, reversing pre-pandemic gains that reduced the debt level to a record-low of 39.6 percent in 2019.
But even with the expected 2021 peak in debt ratio, economists had pointed out that credit rating agencies and multilateral lenders would only be worried when it breaches 60 percent.
Despite the ballooning public debt, which stood at a record P10.41 trillion in February, Dominguez said the government had no plan to introduce new taxes in 2021 to repay obligations.
“Although I must confess that yesterday, I talked to our staff and said, ‘you know, we have to start thinking of winding down this debt.’ Sometime next year, we have to look at potential revenue sources. So we’re working on it right now,” Dominguez said.
Also on Tuesday, the Bureau of the Treasury sold all P35 billion of the new five-year bonds it offered at a coupon rate of 3.375 percent.
“The auction committee made a full award with strong market demand for the new five-year tenor,” which fetched a rate lower than the secondary market level for a comparable tenor, National Treasurer Rosalia de Leon said.
The auction was over two times oversubscribed as tenders reached P80.8 billion.
Tuesday’s T-bonds offering was a bigger amount compared to previous months’ P30 billion.
Last Monday, the Treasury also sold an additional P1.1 billion in 364-day T-bills through its tap facility window.
The Treasury accepted all bids from the 11 government securities eligible dealers (GSEDs)-market makers even as these were below the P5-billion tap offering.
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