NG eyes $100-M currency swap

The Arroyo administration is considering the possibility of entering into a commercial currency swap agreement with ING Baring for a total of $100 million.

With negotiations still ongoing for a similar swap agreement with the Asian Development Bank (ADB), the Department of Finance said it has received several offers for swaps and a $100-million transaction was now on the table.

Finance Secretary Juanita Amatong told reporters that the swap with ING Baring was only one of several that the DOF is studying, adding that the government need not pursue the ADB deal if the terms were unacceptable.

She said the general terms of the ING transaction was similar to the ADB deal where the government would exchange pesos for dollars at an agreed exchange rate. Government would pay for the dollars in local currency over a pre-agreed period with a pre-agreed interest.

Amatong did not reveal the terms offered by ING Baring but hinted that the government has been considering other currency swap offers after the ADB refused to improve the terms of its currency swap scheme.

Amatong said that since the ADB was a triple-A rated institution, it should pass on the benefits of its preferential rating to the Philippines in order to reduce the overall cost of the swap to the Philippine government.

She said there were other currency swap agreements pending for study but declined to identify which institutions were involved.

The Bangko Sentral ng Pilipinas (BSP) has been pressing the DOF to accept the terms offered by the ADB instead of making further demands on the ADB, particularly on pass-on rates.

However, the DOF has been reluctant to accept the terms of the swap because Amatong wants the ADB to offer concessionary rates when it lends the peso proceeds to local banks.

BSP Governor Rafael Carlos Buenaventura, on the other hand, supported the ADB’s terms, explaining that the government would benefit even without the preferential pass-on rate that the DOF is asking for.

"We’d be exchanging soft currency for hard currency, what can be better than that?" Buenaventura said. "Even without the preferential rates, just the fact that the currency would be tied to the agreed rate for 10 years is already an advantage."

In an interview with reporters before he left for the spring meeting of the International Monetary Fund, Buenaventura said the BSP was counting on the ADB currency swap to partly alleviate the government’s foreign exchange gap while making available the funds needed by the key economic sectors.

"If they are negotiating with other groups, I hope the DOF would make sure the other proposals they get would have the right fixed income rates and that the offered currencies will also be available to local banks for their own dollar needs and for re-lending," Buenaventura said.