Foreign borrowings unlikely this year, says Tan

MANILA, Philippines - Despite the approval of the Bangko Sentral ng Pilipinas (BSP), the Aquino administration may no longer borrow abroad this year, losing an opportunity to secure early financing for 2016 at favorable rates ahead of the US central bank rate hike.

In a text message, National Treasurer Roberto Tan said the government is “unlikely” to tap the foreign debt markets in a month’s time, pending other regulatory approvals it needs to secure.

“We need to apply for shelf filing from the US SEC (Securities and Exchange Commission). That will take at least four weeks at the earliest,” Tan said.

“It can take longer if a full review is imposed by the regulator,” he added.

The government has secured the Monetary Board’s nod to a foreign debt issuance, Tan said, without confirming the amount requested. Reports pegged the allowable amount at $2 billion.

The central bank approval was needed since a foreign debt issuance affects the amount of foreign inflows that enter the country.

Additionally, the government had filed an application to add to its US debt shelf before the US SEC. The debt shelf prescribes a sort of credit line for dollar-denominated debts that may be issued by entities.

It was in 2010 when the country last reportedly filed a renewal of the shelf, amounting to $5 billion. Tan earlier said most of that amount have already been used, but declined to reveal how much is being sought by the Philippines this time.

According to the 2015 budget, the government planned to borrow P700.822 billion this year: P605.122 billion from the domestic market, and the balance of P95.7 billion from abroad.

Converted into dollars, the government aims to raise $2.15 billion in foreign financing this year, of which only $2 billion has been secured last January.

While the remaining amount may no longer be floated, Tan said the government is not closing its doors in borrowing abroad next year.

“We will watch market developments and consider issuing when conditions are conducive,” Tan said.

Sought for comment, Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, said the government may have missed out on opportunity to borrow at “affordable rates” this year pending action by the US Federal Reserve.

The US central bank is highly expected to raise key rates for the first time in almost a decade, probably causing a ripple effect of rising rates across the globe, particularly emerging markets like the Philippines.

“Certainly, there is a missed opportunity to borrow when rates are still affordable,” Neri said in a phone interview.

“There are maturities early next year that is why there is need for government to tap the market. That said, we do not see any sizable increase in rates next year anyway,” he said.