Treasury expects lower debt ratio last year

Published February 5, 2020, 12:00 AM

by manilabulletin_admin

By CHINO S. LEYCO

The national government’s outstanding debt as a proportion of the country’s economy may have likely been fallen faster than expected last year amid the Duterte administration’s proactive borrowing strategy, the Bureau of the Treasury said.

Based on the treasury bureau’s assessment, the debt-to-gross domestic product (GDP) ratio of the national government likely settled at 41.59 percent last year, slightly lower than the 41.72 percent target level.

National Treasurer Rosalia de Leon said the lower share of government debt is attributable to favorable interest rates given by investors to the Philippine notes, which resulted in an estimated interest payment savings of ₱40.3 billion in 2019.

De Leon also said that their proactive borrowing strategy reduced the government’s exposure to foreign exchange risks through higher borrowings from the domestic market.

In 2019, domestic borrowings accounted for 70 percent of the government’s financing activities last year, achieving the treasury bureau’s goal of a 70:30 borrowing mix.

De Leon added that the government was also able to diversify its offshore borrowings last year.

To recall, the government sold $1.5 billion of 10-year global bonds, 750-million euros of “Euro” bonds, 2.5 billion renminbi of “Pand” bonds, and 92 billion yen of multi-tranche “Samurai” bonds in 2019.

The US-dollar global bonds were priced 110 basis points (bps) above benchmark US treasuries, while the Euro bonds were priced 70 bps above benchmark.

The three-year Panda bonds were also priced even tighter at 32 bps, while the multi-tranche Samurai bonds had a weighted average spread of 37 bps.

“This proactive borrowing strategy took advantage of positive market developments to secure tight pricing for our global bond issuances,” De Leon said in her report submitted to Finance Secretary Carlos G. Dominguez III.

 
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