PH returns anew to overseas debt markets

Published December 2, 2020, 4:00 PM

by Chino S. Leyco

The Duterte administration has tapped anew the overseas debt markets to bridge the government’s wider budget deficit and cushion the impact of the COVID-19 pandemic, the Bureau of the Treasury announced.

The national government is offering to overseas investors its 10.5-year and 25-year US dollar-denominated bonds, which would carry a yield of around 100 basis points above the 10-year US Treasury benchmark.

National Treasurer Rosalia De Leon

National Treasurer Rosalia de Leon said the national government would use the proceeds from the bond sale to support its budget.

Credit Suisse, Daiwa Capital Markets, Deutsche Bank, Morgan Stanley, Standard Chartered Bank and UBS are joint bookrunners.

The latest commercial borrowing this month follows the $2.35 billion bond sale in April and 1.2-billion euro double-tranche global bond offering in January.

The US dollar-denominated notes, meanwhile, received a “Baa2” senior unsecured rating from Moody’s Investors Service.

“The Philippines’ Baa2 issuer rating has been characterized in recent years by strong economic performance, a strengthening fiscal position and limited vulnerability to external shocks, although the global coronavirus pandemic will disrupt or potentially reverse these trends,”Moody’s said.

In 2020, the Philippines suffered a sharp economic contraction, the worst outturn in 35 years.

“Unless the Philippines faces a significant and prolonged drop in remittances and an acceleration in the fragmentation of regional supply chains, growth potential will continue to be boosted by favorable demographics and ongoing improvements in the investment climate,” Moody’s said.

As of October this year, the national government’s gross borrowings already stood at P3.224 trillion, higher by 233 percent compared with P967.55 billion in the same period last year.

Breaking down, total domestic borrowings rose by 293 percent to P2.649 trillion from P673.8 billion, while foreign financing reached P574.43 billion, also higher by 95 percent compared with P293.75 billion last year.

Meanwhile, the national government’s outstanding debt stood at P9.368 trillion as of September 2020, higher by 18.5 percent than P7.907 trillion in the previous year.

The government needed to borrow to bridge its widening budget deficit in 2020 due to COVID-19 pandemic.

The Philippines is in recession this year after its economy slid by 11.5 in the third quarter, 16.9 percent in the second quarter, and 0.7 percent in the first. 

In the first three-quarters of the year, the country’s gross domestic product contracted by 10 percent.