Government to source more ODA funding

MANILA, Philippines — The government plans to expand its official development assistance (ODA) portfolio next year as it monitors how the phasing out of the London Inter-Bank Offered Rate (LIBOR) will affect interest rates in commercial auctions.

Finance Undersecretary Mark Dennis Joven said the government would keep a close watch on how the decision to discontinue LIBOR by the close of 2021 would change pricing in bond offerings abroad.

He said the government plans to expand its ODA portfolio in the meantime as the debt market goes through adjustments that may cause instability in bond offerings.

“For 2022, we have to consider that globally, there is a change in the benchmark rates. So, from LIBOR, it will be modified and forked into various benchmark rates, [and] I think this may result in some instability in the interest rate market in the near term,” Joven said in a recent interview.

“That’s why we are coming in prepared. Basically, as you can see from the disclosures, we have buffered up on the ODA side, on multilateral ODAs, just in case the market becomes a little bit choppy,” he said.

Joven said the government will keep its borrowing criteria of assessing the financing cost, swap rates and tenor to make sure the benefits outweigh the risks to the economy.

In 2020, the government made its maiden entry into the European debt market with the issuance of three-year and nine-year euro bonds for 600 million euros each, for a total of 1.2 billion euros.

It also broke into the same debt market last year for its second offering overseas, securing 2.1 billion euros in four-year, 12-year and 20-year global bonds.

“In 2020 and 2021, we saw that the first issuance was always euro bond issuance. [As to] why, because at that point, interest rates were low for euros, so we took the opportunity and basically demand was robust,” Joven said.

The government intends to cut its borrowing program to P2.47 trillion next year, from a volume of P3.07 trillion in 2021, as part of efforts to temper the rise in the country’s outstanding debt.

The Bureau of the Treasury will open the new year by borrowing P200 billion from the domestic market through the sale of P140 billion in Treasury bonds and P60 billion in Treasury bills.

Under the plan, the debt pile will reach a record P13.42 trillion by the end of 2022, equivalent to 60.8 percent of gross domestic product.