MANILA, Philippines — The Department of Finance is planning to gradually shift the Philippine government’s borrowing mix toward domestic sources, targeting a 90 to 10 percent split in favor of local debt over the medium term.
In an informal chat with reporters, Finance Secretary Ralph Recto said the government is considering different kinds of bond issuances next year. However, it is important to reduce foreign exchange risks.
“We’re considering all of them, but we want to limit our foreign borrowings. We want to reduce that. So next year, I think it’s 75-25 percent, possibly even 80-20 percent. I think the plan is to reduce that to 90-10 percent over the medium term,” he said.
While acknowledging that the plan may stretch beyond the current administration, Recto said that the strategy is already in motion, with the end-goal of reducing and managing foreign exchange risks more effectively.
For next year, Recto said the government is considering both dollar and euro-denominated bonds, although details remain with the Treasury.
“We’re looking at potential issuances in the first half of next year, possibly raising around P300 billion, more or less,” he said.
While the specific amounts are still under discussion, Recto said the main objective is to maintain a balanced and sustainable borrowing structure.
As part of the financing strategy, Recto also expressed openness to issuing Sukuk bonds to tap into investor appetite from the Middle East.
“There’s an appetite for Sukuk. If investors are willing to finance government operations, we’ll consider it,” he said.
He also noted that the government is considering yen-denominated bonds, as the weakening Japanese yen could offer favorable borrowing conditions from Japan.
Based on the latest data from the Bureau of the Treasury, the national debt rose by 10.6 percent to P16.02 trillion as of end-October, the highest level to date.
Domestic borrowings accounted for the bulk or almost 67.98 percent of the debt pile, while the remaining 32.02 percent came from external sources.
Domestic debt rose by 10 percent to P10.89 trillion from P9.9 trillion in the same period a year ago. External obligations jumped by 12.1 percent to P5.13 trillion from P4.58 trillion in the same period last year.
The share of national debt to the country’s output rose to 61.3 percent in the third quarter from 60.9 percent in the previous quarter.