Outgoing Finance Secretary Joel Banares said the proceeds of the bond flotation will be used to fund the projected budget deficit of P145 billion this year.
Banares said the government is also looking at other proposals by foreign banks which want to undertake the bond flotation that could take place sometime in June or July.
These include Chase Manhattan, JP Morgan, Morgan Stanley, ING Barings, Lehman Brothers and Credit Suisse.
The government was supposed to conduct an international roadshow this first quarter but decided to defer it to the start of the second semester.
Banares sad the roadshow had to be deferred as the government still has not come up with concrete moves to address the budget deficit as well as firm measures to implement much-needed policy reforms that would lure foreign investors and attract lenders.
Banares said this will give the government more time to come up with firm numbers, referring to more realistic economic targets, and to convince international credit rating agencies not to downgrade the country’s credit ratings.
He added that investors are waiting for the results of the May elections, as well as the passage of the Omnibus power bill and proof that government has improved its fiscal performance. "We also have to show investors that we can meet out economic targets," Banares said.
At the same time, government has to "work up" international credit agencies to ensure the current credit ratings stay and prevent a downgrade that would make it harder for the country to acquire new loans.
Banares said the Philippines is in the negative watch list of IBCA Fitch. Standard and Poor’s on the other hand, was asked to postpone its review of the country’s credit rating from January to March.
The Department of Finance earlier recommended a 76.24 borrowing mix, with domestic borrowing taking the bulk. About P129.7 billion will be borrowed from domestic sources, while P41.8 billion will come from foreign sources.
"Government wants to exhaust domestic sources while interest rates are down," Banares said. – Rocel Felix