PH plans sukuk issue by yearend

The Philippine government is looking to issue Islamic bonds, also known as sukuk bonds, by yearend or in the first quarter, National Treasurer Rosalia V. de Leon said.

This would mark the Philippines’ debut in the Islamic bond market, as the government looks to fund its budget deficit.

“As for the timing, we’ve been told that there would have to be a 12-week preparatory lead time that would be needed, so hopefully we can do this before the end of the year or if ever, it would have to slip to the first quarter of 2024,” Ms. De Leon said during the Philippine Economic Briefing in Dubai on Tuesday.

She said that the government is now consulting potential underwriters for the details of the issuance, including its structure, which may be a “hybrid Wakalah, Ijara or Murabaha.”

“In terms of the tenor size, I think the sweet spot would be between the long (tenors of) five and the 10-year (bonds) because this would also be something that would be catering to our small investors and at the same time also to the institutional investors,” she said.

Ms. De Leon did not give the offer size for the planned sukuk bonds. In July, Finance Secretary Benjamin E. Diokno told Bloomberg that the government was eyeing to raise USD 1 billion from the sukuk bond deal.

Bangko Sentral ng Pilipinas (BSP) Assistant Governor Arifa A. Ala said that the sukuk issuance is a “good complement” for the central bank’s efforts to promote Islamic banking in the country.

“Having sukuk bonds being issued by the National Government will send a strong signal that the Philippines is now ready to accept applicants (and) new players in the Islamic banking system,” she added.

Ms. De Leon also reaffirmed the government’s plan to offer US dollar-denominated retail Treasury bonds within the month.

“Even in terms of the tenor, we’re looking at the belly of the curve, so that would be a long five. The other feature is that the tax would be assumed by the government, that means the full coupon would be going to our Filipino investors. That’s something we hope to launch (by) the end of the month,” she added.

The government is planning to offer USD 5 billion worth of bonds this year, the national treasurer said.

“We’re looking at another billion-dollar issuance and maybe this time around, if we make it to the 12-week preparation time, then we’ll be issuing a sukuk structure bond as the remaining issuance from the Republic for the rest of the year,” she added.

Maharlika Fund
Meanwhile, the economic team presented the country’s first sovereign wealth fund, the Maharlika Investment Fund (MIF), to potential investors in Dubai.

“During this visit to Dubai, we’ve been in touch with sovereign wealth funds, but even with infrastructure funds and potential co-investors, looking into joint ventures,” Ms. De Leon said.

“We’ve been able to present a list of our infrastructure flagship projects and how these would complement their own priorities.”

In July, President Ferdinand R. Marcos, Jr. signed into law the Maharlika Investment Fund Act of 2023, which creates the MIF.

The sovereign wealth fund will be managed by the Maharlika Investment Corp. (MIC), which will have authorized capital stock of P500 billion.

“It’s intended to be an additional funding source. We’ll probably graduate to upper middle-income status within two years and will no longer be entitled to concessional loans. This is in preparation for that,’ Mr. Diokno said.

The Finance chief said that the Philippines must ramp up investments in projects that will improve physical and digital connectivity, as well as boost the country’s transition to clean energy. — Luisa Maria Jacinta C. Jocson, Reporter