Government mulls global bonds to pre-fund 2010 needs

MANILA, Philippines - The government may again issue global bonds in the last quarter of the year to pre-fund the country’s financing requirements for 2010, Finance Secretary Margarito Teves said yesterday.

He said the government may consider taking advantage of lower borrowing costs now that there is ample liquidity in the international commercial market.

“The Philippine government is looking into suggestions from investment banks and hedge funds for the issuance of global bonds for pre-funding requirements next year in view of ample market liquidity and lower financing costs even for longer maturities,” Teves told reporters yesterday.

Teves said that during the Philippine government’s no-deal road show in New York and London last week, investors noted the country’s steady growth despite the challenging economic environment.

Investors, the Finance chief added, also noted the resiliency of dollar remittances from overseas Filipinos as these have steadily poured in despite the worldwide financial turmoil.

Remittances from overseas Filipinos rose to $1.5 billion in July from $1.4 billion in the same month last year, posting the highest year-on-year growth for 2009 at 9.3 percent.

The July figures brought remittances in the first seven months of the year to $10 billion, up by 3.8 percent from the year-ago level, data from the central bank also showed.

The economy, meanwhile, expanded by 1.5 percent in the second quarter of the year, faster than the 0.4 percent growth in the first quarter.

If the government pushes through with another global bond issuance, it would be the third for 2009 following the successful sale of $750 million worth of dollar-denominated bonds last July and the $1.5 billion sold in January.

Another option for the government to raise funds is through the issuance of Samurai bonds or yen-denominated bonds to be guaranteed by the Japan Bank for International Cooperation (JBIC).

The Philippines and JBIC have signed a memorandum of understanding for the proposed Samurai bonds. The last time the Philippines tapped the Japanese capital market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to Japanese Yen 50 billion.

The government is looking at ways to raise funds for its budgetary requirements and to plug its widening budget gap.

The Development Budget Coordination Committee (DBCC), the interagency group that sets the country’s macroeconomic assumptions, has revised the 2009 deficit ceiling to P250 billion from the previous programs of P199.2 billion, P177 billion and P40 billion. The DBCC revised the deficit program for the year due to the prolonged impact of the global financial turmoil.