Gov’t wants to ‘pesofy’ debt in dollars

The Department of Finance is looking at plans to further ease the government’s debt burden by converting into pesos the high-cost dollar bonds now that interest rates are low.

Finance Undersecretary Rosalia V. de Leon said in a briefing that the government agency would continue its tack of managing the state’s outstanding obligations, specifically by pushing for longer tenors and lower rates.

The government plans to buy back “high coupon” dollar bonds with proceeds from domestic borrowings, De Leon said.

“Our latest issue of 25-year global bonds costs us 5 percent. Some older ones fetched 8 percent, 9 percent and even higher. We are keen on doing a buy-back of expensive dollar denominated debt with peso [funds],” de Leon said. “In that sense, we are pesofying the dollar bonds.”

The government still has the authority to borrow as much as $750 million from abroad, she added. “There are at least $800 million worth of debt paper available” for a buy-back.

De Leon said the buy-back may be done either by swapping outstanding bonds with new issues or through a tender.

“Right now our focus is to manage our liabilities and to take advantage of domestic liquidity,” she said.

There are no definite decisions yet and the DoF has not sought the approval of either the Bangko Sentral ng Pilipinas or the Office of the President, she clarified.

Latest data from the Bureau of the Treasury showed that the government’s foreign debt stock—those booked in dollars, euros and yen—settled at P2.074 trillion, or 41 percent of total obligations as of end-March.

This meant a decrease of P11.8 billion, or 0.6 percent, from the P2.086 trillion owed to overseas lenders in February.

The decrease in foreign debt was attributed mainly to the depreciation of the yen and the euro against the dollar, which shaved off P12.8 billion from the debt stock.

Also, the government repaid P3.9 billion more than the amount it borrowed in March.

On the other hand, the depreciation of the peso against the US dollar helped push up outstanding foreign debts by P4.9 billion.

In March, government debt notes pegged in dollars amounted to an equivalent of P1.072 trillion, while yen and euro loans stood at P52.1 billion and P28.6 billion, respectively.