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THE
government is crafting the outlines of a
dollar-denominated bond targeted at overseas Filipino
workers, seen to generate an initial $100 million,
roughly P4.5 billion at the current rate of exchange.
Set for
issuance soon, the bond proceeds will form part of
government’s general funds and help bridge the year’s
budget gap that policymakers assure should not widen
beyond P63 billion.
Should
it prove a hit, the government might issue $1 billion
worth or even more.
Some of
the paper’s characteristics have already been
determined, but more have yet to be cast in stone
consistent with existing fiscal and monetary policies,
Land Bank vice president for corporate finance Alex
Macapagal said on Friday.
For
instance, he said, the bonds will only be sold locally
owing to a host of regulatory complications that come
with its sale in the United States, Italy, Japan or the
United Kingdom.
“The
sale of securities in most countries is a tightly
regulated activity that can be sidestepped by selling
them in US dollars, but only locally,” Macapagal
explained.
The
plan, he adds, is to issue the sovereign IOUs in
tranches of $100 million “to determine market appetite
and build momentum.” How large the bond sale eventually
becomes will depend on the market’s reception.
Details
like the minimum investment for each OFW have not yet
been determined at this point, although Macapagal said
it should be small enough to attract the retail-minded
overseas worker without giving the issuer administrative
headaches.
Of
course, he said, Land Bank gets to lead-underwrite the
bond sale in partnership with privately owned financial
institutions.
The
Bangko Sentral ng Pilipinas earlier expressed support
for such a bond, as its sale will help address the need
for a mechanism that softens the impact of the foreign
inflows-driven peso and its 9-percent year-to-date
appreciation thus far.
The
foreign inflows have become a “happy problem” for the
BSP as the purchase of dollars necessarily mean the
release of potentially inflationary liquidity.
But with
the bonds denominated in foreign currency, the OFW
investor need not convert his US dollars for pesos and
thus the complications this raises are avoided.
Officials said the OFW bonds also form part of a broad
financial literacy program soon to introduce millions of
schoolchildren nationwide to the idea of saving
something for a rainy day. |
