Retail dollar bond sale eyed by September

The government is looking to offer retail dollar bonds by September, National Treasurer Rosalia V. de Leon said.

“We are doing all the marketing now. If markets are favorable, maybe in September,” Ms. De Leon said during a press chat at the Department of Finance (DoF) on Friday.

Earlier, the government announced its plan to launch the offering within the third quarter.

Ms. De Leon said the government is targeting an offer size of USD 2 billion.

The Philippines had its last retail dollar bond sale in 2021, when it raised almost USD 1.6 billion.

Finance Secretary Benjamin E. Diokno said that the economic team will also discuss the bond offering during the Philippine economic briefing in Toronto, Canada on July 13.

“We are going to float the dollar-denominated bonds, there is interest from Filipinos abroad to invest in retail dollar bonds,” he said.

“We would like to talk with overseas Filipino workers to provide them an outlet for investing. In fact, we even lowered the minimum denomination. It was USD 300 the last time, it is now just USD 200 and (it will be) tax exempt,” Ms. De Leon added.

When asked about the possibility of launching euro bonds, Ms. De Leon said “maybe for next time.”

“There were requests for euro bonds when we were in Frankfurt. Maybe next year, when the conditions in the Philippines are more attractive,” Mr. Diokno added.

‘Manageable debt’
Meanwhile, Mr. Diokno said that the National Government’s (NG) outstanding debt, which reached a record PHP 14.1 trillion as of end-May, is still manageable.

The Finance chief said that the debt-to-gross domestic product (GDP) ratio will likely end the year at 60% to 61%.

“Still manageable… our debt is reasonable, by any standard, at 60%. We plan to reduce that to 51% (through) a combination of lower borrowing and higher GDP,” Mr. Diokno said.

As of end-December, the country’s debt-to-GDP ratio stood at 60.9%, improving from the 63.7% ratio as of end-September.

This is slightly lower than the 61.8% target under the medium-term fiscal framework, but still a tad above the 60% threshold considered manageable by multilateral lenders for developing economies.

The government aims to cut the debt-to-GDP ratio to less than 60% by 2025, and further to 51.5% by 2028.

As of end-May, the NG’s outstanding debt rose 1.3% to PHP 14.1 trillion from PHP 13.91 trillion at end-April. Year on year, it jumped 12.8%.

“The debt-to-GDP (ratio) before the pandemic was around 39% and then it went up because we had to borrow money for medicines, plus revenues went down,” Mr. Diokno said.

“As a result of the pandemic, it’s reasonable to assume, and in fact the International Monetary Fund (IMF) has accepted, that 70% is the acceptable level of the debt-to-GDP because of the crisis,” he added.

Ms. De Leon said that the government will still be able to lower its debt-to-GDP ratio even if it exceeds its borrowing program this year.

This year, the government plans to borrow PHP 2.2 trillion, consisting of PHP 1.654 trillion from domestic sources and PHP 553.5 billion from external sources.

“We have borrowed from the domestic market as of May around PHP 880 billion, so we still have PHP 770 billion for the last parts of the year,” she said.

Ms. De Leon said that while the government may exceed its debt program this year, this will be managed through its debt servicing.

“We are repaying the debt, so it will be trimmed. What is important is the debt-to-GDP ratio. Our general government debt is even lower than our NG debt,” she said.

According to Ms. De Leon, the general government debt-to-GDP ratio was at 54.7% as of 2022.

“This is the metric being looked at by credit agencies. In 2023, we’ll be hitting around 54% of general government debt, and by 2028, that will be about 48.5%,” she added.

Ms. De Leon said that credit agencies are also “not concerned” about the country’s debt profile.

“They can see our debt profile continues to be resilient. Why? If you look at the composition, 68% is local currency, in peso. Most importantly, those with return on equity are held by residents, so that will not leave the country,” she said.

“Second, the average maturity of our debt portfolio is about 7.6 years, so it’s very manageable in terms of our repayment capacity. Even in terms of interest rates, only about 88% is fixed, so there is no repricing,” she added.

Mr. Diokno also noted that it is important to consider where the debt is being used.

“It’s not bad to borrow money. We are using the money for infrastructure. We are expanding the capacity of the economy. And also, productivity-enhancing measures, like the improvement of teacher education. That’s important,” he added. — Luisa Maria Jacinta C. Jocson