DOF raises P15 B to fund deficit

The Department of Finance (DOF) has successfully raised P15 billion from various sources to finance next year’s budget deficit, Finance Secretary Jose T. Pardo said yesterday.

Pardo said the finance department has just entered into a private bond placement with Chase Manhattan worth $200 million (P10 billion) with a spread of 420 basis points over ta floating LIBOR (London interbank borrowing ) rate.

"Chase Manhattan’s offer was the most reasonable in terms of rates and terms of commitment," the finance head said.

The deal was completed in just one week in complete secrecy.

Pardo said the 420-basis point spread is lower than the prevailing market rate of around 650-basis points for five-year debt instruments.

The DOF also signed yesterday an underwriting agreement with six financial institutions to sell another P5-billion worth of small-denominated T-bills (SDT).

National Treasurer Leonor Briones said the SDT bills will be floated in the first week of January next year and will carry the same rate as the seven year T-bonds.

The seven underwriters are BPI Capital, Development Bank of the Philippines, BDO Capital, PCI Capital, Land Bank of the Philippines and First Metro Investment.

"The proceeds of the $200-million private placement and the P5-billion SDT is intended to help finance next year’s budget deficit," Briones said.

The International Monetary Fund (IMF) expects the country’s budget deficit to hit P120 billion in 2001.

For the first 11 months of this year, the country’s deficit has already hit P114.4 billion, exceeding the full year target of P111.7 billion.

Government officials said this year’s deficit is already funded by earlier borrowings of the government. – Marianne Go