BSP set to borrow $500-M

The Bangko Sentral ng Pilipinas (BSP) said yesterday it would borrow $500 million after an agreement with a banking syndicate that will allow it to pay off maturing debts in October and some of its obligations next year.

The BSP said in a statement the deal was for a fully underwritten amount of $500 million with a spread over LIBOR of 2.26 percent.

The participating banks are Citibank NA/Citigroup Inc., Credit Lyonnais, DBS Bank Ltd., HSH Nordbank AG, Mizuho Corporate Asia Limited, Standard Chartered Bank and Sumitomo Mitsui Banking Corp.

"Considering the non-economic factors, we are very pleased with the pricing. This is reasonable," BSP Governor Rafael Buenaventura told reporters.

"This will allow us to fund not only our maturing loan in October but also pre-fund our liabilities next year. By doing this early, we can leave the bond market open for the National Government for the rest of the year."

The central bank last raised $585 million from a five-year loan facility in March, with $500 million used to pay obligations in April.

The bank’s debt is not related to the government’s budget deficit and stems mainly from its efforts to boost reserves after the Asian financial crisis in 1997-98.

The central bank’s remaining obligation this year is $200 million of debt coming due on Oct. 27.

Buenaventura said excess money from the loan would be used to prop up the country’s dollar reserves.

"It will boost the GIR. It will stay there until we need the money to repay debt," he said.

At the end of August, the Philippines has gross international reserves of $16.17 billion, slightly higher than the $16.14 billion at the end of July.

Meanwhile, the BSP is considering the revision of current account projections as exports are expected to slow down in the wake of the economic recession in the US.

Emerging economic data has caused economic planners to reconsider their projections both for the rest of the year and 2004, especially with the see-sawing performance of specific sectors in the US economy, particularly those that affect the country’s North American export market.

The BSP’s conservative projections for 2004, however, may need further review towards the possibility of adjusting expectations in the current account of the country’s balance of payments.

BSP Governor Rafael Buenaventura told reporters over the weekend that exports normally pick-up in the final months of the year closer to the holiday season but August numbers appeared discouraging, with the Bureau of Customs (BOC) reporting a dramatic decline in imports.

This time of the year, imports are expected to pick up as manufacturers beef up their stocks in preparation for the increase in production for the Christmas season. The uncharacteristic decline in imports, according to market sources, could indicate a decline, in production despite the initial projections of an increase.

According to Buenaventura, it was possible that exporters held off their imports only while the peso-dollar exchange rate was unfavorable but he said there was still a need to review the BSP’s current account projections in the light of the expected slowdown in exports.

Buenaventura said the BSP wanted to do a calibrated assessment of the impact of the developments in the US economy on the country’s exports and how it could be balanced by the favorable performance of the Japanese economy, the country’s other major trading partner. – Reuters, Des Ferriols