The government will provide the cash requirements of Power Sector Assets and Liabilities Management Corp. (PSALM) through regular debt offerings instead of a special issue, according to National Treasurer Roberto B. Tan.
In an interview on Tuesday, Tan said the Bureau of the Treasury (BTr) would simply include PSALM’s funding needs of P75 billion to P80 billion in the bureau’s general funding program.
“We might just lend them money and then include that in our regular auctions and other fund-generating exercises,” he said. “Right now we are just looking at our regular borrowing activities for that.”
He said the BTr would either raise its borrowing program or dedicate proceeds of a regular auction for PSALM. He was, however, quick to add that this would not bloat the government’s debt as meeting PSALM’s requirements would still depend on the state’s cash balance.
“We can do it anytime,” Tan said.
In fact, he said the BTr had provided advances to PSALM worth P7 billion to P8 billion last month.
Citigroup Global Markets, however, said in a research note the BTr should consider borrowing more from outside the country to offset market worries about having “overborrowed” from domestic lenders during the first quarter.
“With a change in cash of P128.5 billion in the first quarter after funding (expenditures) and regular amortization, having a budgetary surplus of P31 billion in April serves to reinforce our view that the Treasury may have ‘overborrowed’ locally in that period,” Citigroup said.
“Market confidence would be strengthened if the Treasury were to tap offshore markets via a global peso note (GPN) to partially replace its local borrowings,” it added.
Financial experts describe the GPN as a hybrid debt paper since it is denominated in peso but payable in dollars.
The Philippines has so far issued GPNs twice–P44.1 billion, or $1 billion, in 10-year notes in September 2010 and P54.77 billion, or $1.25 billion, in 25-year notes in January 2011.