Gov't to tap local mart for PSALM financial needs

MANILA, Philippines - The government will tap the cash-rich domestic market for an initial P30 to P40 billion for the Power Sector Assets and Liabilities Management Corp. (PSALM), the entity tasked to manage and dispose of the government’s power assets.

Finance Undersecretary Rosalia de Leon told The STAR that the government is considering borrowing an initial tranche of PSALM’s estimated P85 billion funding requirement in May through the issuance of bonds and continue with the second tranche in the latter part of the year.

De Leon said PSALM has total funding needs of P85 billion for 2012.

 “We will do some P30 to P40 billion first in May and the rest we will do it most likely later this year,” she said.

De Leon said that the government would do away with the usual practice and borrow on behalf of PSALM instead of the agency doing the fund-raising activity.

She said this would save the government financing cost – 50 basis points lower than the borrowing cost of state agencies.

Early last year, PSALM has obtained P75 billion in syndicated term loan to meets its funding requirements.

The government plans to borrow $4.02 billion externally this year, lower than the programmed $4.5 billion in 2011, according to the latest data from the Department of Finance (DOF).

Of the $4.02 billion, the government plans to borrow $2.25 billion from the commercial debt market and to borrow $1.77 billion worth of program and project loans.

The 2012 borrowing program has a proposed mix of 75 percent and 25 percent, in favor of domestic sources.

The government borrows from the local and overseas debt market to plug its budget deficit, which is projected to hit roughly 2.6 percent of gross domestic product (GDP) this year.

Last year’s budget gap reached P197 billion, below the programmed ceiling of P300 billion set for last year