The Department of Finance (DOF) will instead use only about half of the loan and the balance will be used to guarantee other loans from which government expects larger proceeds.
Finance Secretary Jose Isidro Camacho said he briefed World Bank officials, including WB president John Wolfensohn when he was in New York and Washington last week to work out possible guarantee grants for the country’s forthcoming offshore borrowings as well as updated them on the country’s economic situation following the Sept. 11 terrorist attacks on the US.
"Against that guarantee we can borrow more. With the approval of the World Bank, we can upgrade the credit rating of our issuance of debt notes," Camacho said.
At this point, Camacho said he expects negotiations for the approval of guarantees on Philippine debt instruments, including the PSRL loan to take another six to nine months.
"But once the loan is approved, it will be easier for us to ask that a portion of that be used to guarantee our other planned borrowings from which we expect to get more," Camacho said.
The government is rushing its offshore borrowings next year as emerging markets’ spreads on their bonds are seen to widen further.
The capability of emerging markets such as the Philippines to have access to international credit sources is in doubt because of the projected downturn in its economy, especially with its major trading partner, the US, also suffering from an economic slump.