Duterte clears up to $2 B foreign borrowings in Q1

MANILA, Philippines – President Duterte has given the go-signal for his administration’s first borrowing abroad which could reach up to $2 billion by the first quarter.

“We were informed that it has been approved already,” National Treasurer Roberto Tan told reporters yesterday.

The approval was the last needed to push through with the issuance of global bonds offshore.

The central bank’s Monetary Board had already cleared the transaction for its potential impact to capital inflows and foreign exchange rate.

Broken down, Tan said only $500 million will be “new money” to finance this year’s budget deficit, while $1.5 billion will be “liability management.”

The latter amount means new bonds with longer payment terms and lower rates will be exchanged for existing ones that could have higher rates.

“We are already discussing (the issue) with our banker partners. There is no tenor yet,” Tan said.

Under the 2017 budget, borrowings are poised to decrease 9.22 percent this year to P631.29 billion.

Broken down, the bulk of credit will be denominated in pesos at P505.03 billion, while the balance of P126.26 billion will come from foreign sources. The latter includes selling of bonds and official development assistance.

The Bureau of the Treasury yesterday sold P15 billion worth of three-year Treasury bonds on its first local borrowing for the year.

The paper fetched an average rate of 3.364 percent, up 19.5 basis points from the previous auction last Oct. 20.

“There was very good demand and very good pricing. I think markets are settling. Yields are down compared to last month,” Tan said.

“We opened the tap (market) for those who would still like to participate,” he said, adding additional P15 billion will be sold through the facility today.

Last month, the US Federal Reserve raised its interest rates by 25 basis points as expected and Tan earlier said local rates could follow suit.

Higher rates may require the government to put more money for debt payments instead of spending them for public projects.

“We are hoping for the best this year,” Tan said.