RP monitors Dubai debt crisis

MANILA, Philippines - The Philippines is closely monitoring the impact of the Dubai debt crisis on global financial markets before proceeding with its plan to borrow overseas next year, the country’s fund keeper said.

“We will monitor how the market behaves and take action or inaction,” National Treasurer Roberto Tan told reporters.

The Philippines raises funds by borrowing from the foreign and local markets.

The government is looking at borrowing $2 billion from foreign commercial creditors next year and $1.8 billion from multilateral lenders or a total of $3.8 billion.

This year, it raised $3.2 billion from the issuance of global bonds.

Tan, nonetheless, believes that the Dubai debt crisis is likely temporary and may not affect the Philippines significantly.

“There’s an impact of external markets and a spike in volatility but this is going to be very temporary,” he said.

Dubai shook financial markets worldwide last week when it sought a six-month reprieve on billions of dollars of debt issued by the flagship firm Dubai World conglomerate and its property subsidiary Nakheel, builder of luxury homes on three man-made, palm tree-shaped islands.

The news rattled global capital and financial markets worldwide.

Tan, however, said the reaction of markets around the globe may just be temporary. “I think it’s going to be a short bout of volatility,” he said.     

Tan said the situation may even encourage investors to park their funds in other areas such as Asia. “It can even influence capital to move in some areas like Asia,” he said.

The Bangko Sentral ng Pilipinas (BSP) has said that the banking industry would be spared from the crisis as local banks have no direct exposure in Dubai banks.

Analysts said the effect of the Dubai crisis on the peso is yet to be tested as the foreign exchange market deals with possible volatilities. Global investors are also assessing the possibility of another global systemic crisis arising from the debt problems in Dubai.

The United Arab Emirates central bank’ assurance that it would provide emergency liquidity for commercial banks has eased the nerves of investors.