Philippines eyes US bond market

MANILA, Philippines — The government is planning to raise funds from the dollar bond market to finance its pandemic response, Finance Secretary Carlos Dominguez said yesterday.

In an interview with Bloomberg TV, Dominguez said the government was also in the process of identifying new revenue sources and ways to pare down debt by next year.

“We will tap the US bond market before rates skyrocket,” he said, but did not provide more details about the planned issuance.

The Philippines raised last week $500 million from the issuance of its first-ever zero coupon yen-denominated bonds with a coupon rate of 0.001 percent.

The government plans to borrow around P3 trillion from domestic and foreign sources to fund its rising pandemic-related expenses.

Dominguez said the surge in contagion that necessitated the reimposition of the most severe community quarantine tier in the NCR Plus area for two weeks until April 11 would make recovery more difficult this year. “Economic growth will be lower than we expected,” he said.

With the gradual restoration of economic activities, economic growth is expected to recover at a range of 6.5 to 7.5 percent this year.

“This lockdown probably will cost us one half of one percent in growth,” said Dominguez.

Even with rising expenses and debt, Dominguez said the national government still has no plans of increasing its borrowings from the Bangko Sentral ng Pilipinas (BSP) and is actually aiming to wind down its P540-billion loan with the central bank by next year.

“We will probably look to wind it down sometime late this year or early next year depending on the situation,” he said.

Also, no new taxes are on the horizon, but the Department of Finance is already looking into other revenue sources.

“At this point in time, we have no plans to introduce new tax measures,” said Dominguez.

“Although I must confess that yesterday, I talked to our staff and I said: You know, we have to start thinking of winding down this debt by sometime next year and we have to look at potential revenue sources. They are looking at it right now, “he said

Dominguez, however, said nothing has been firmed up at this point.

The Philippines has set a cap for its debt as a proportion of economic output to 60 percent of gross domestic product (GDP), coming from 39.5 percent at the start of 2020 and 54 percent at present.