The Philippines is considering bond swaps for the government’s local and foreign debt before an impending US Federal Reserve (the Fed) interest-rate increase, Finance Secretary Cesar V. Purisima said.
“If there’s market opportunity before the Fed acts, we will move,” Purisima, 55, said in an interview in his office in Manila on Friday. “We’re always on the lookout for both foreign and local opportunities to lengthen debt maturity and reduce overall interest cost,” he said, without specifying an amount.
The government is addressing a “systemic problem” in delays to state spending, including ways to accelerate outlays for infrastructure projects, Purisima added. Economic growth slid to a three-year low last quarter, putting pressure on President Aquino to fix bottlenecks before an increase in US interest rates that may prompt financial-market volatility.
“We are trying to correct the system, and when you are reforming, the results can sometimes be unpredictable,” Purisima said. “The good thing is we have the fiscal space. In the next quarters, we can catch up.”
The government may sell new securities of two tenors with a size of at least P50 billion ($1.1 billion) each in exchange for infrequently traded bonds, Treasurer Roberto B. Tan said in March.
The Philippines has sold more than P1 trillion of bonds in debt swaps since 2006, with the most recent in August last year. The government had P5.79 trillion of debt as of end-April, with foreign debt accounting for about 34 percent of the total.
Delays in state outlays have been persistent and have been a drag on economic growth. Public spending fell in the third quarter of 2014 and in the fourth quarter of 2013, with both periods registering the weakest expansion for the year.
Bloomberg News