The Philippines may offer about $750 million of global bonds in 2016 while seeking to keep domestic funding elevated, according to Treasurer Roberto B. Tan.
The country plans to borrow P747 billion ($16.6 billion) next year and will probably sell P33 billion of global bonds, Tan said in a July 4 interview at the Clark economic zone
in Pampanga.
About P643 billion, or 86 percent, will be raised locally, as the market remains very liquid, he said.
The Philippines has increased reliance on the local market to fund its budget, as money supply almost doubled in the five years under President Aquino. A steady flow of remittance by overseas workers and revenue from the outsourcing industry boosted liquidity to P7.6 trillion in May, compared with about P4 trillion at end-2009.
“The government has cut foreign- debt component to 34 percent of the total, reducing our vulnerability to fluctuations in the foreign currency,” Tan said separately in a speech at an event by the National Association of Securities Broker Salesmen Inc. “Ample domestic liquidity has allowed the government to source a majority of its financing requirement locally.”
Of the P104 billion the nation plans to raise internationally in 2016, P71 billion will probably come from official development loans, Tan said, citing preliminary data pending approval from the economic team.
Changing environment
In 2016, local debt sales may increase by 9 percent to P643 billion, compared with P590 billion this year, while external borrowing may drop by 6 percent from P111 billion, according to Tan.
“The environment is changing and there are potential risks, such as threats of an El Niño and rising US rates,” BDO Unibank Inc. market strategist Jonathan Ravelas said. “It makes sense to borrow now to prefund next year’s requirement.”
The Philippines sold $2 billion worth of 25-year notes in January at a record-low coupon for the country’s similar-dated overseas debt, using $1.5 billion to finance the purchase of shorter-dated securities to extend maturity. The nation is looking out for the possibility of a similar debt exchange, as well as opportunities for selling overseas debt earlier than its typical schedule at the start of the year, Tan said.
Bloomberg News