The Marcos administration plans to debut in the Islamic debt market by borrowing $1 billion.
The Bureau of the Treasury confirms the government's intention to raise around P56.6 billion through Islamic bonds (sukuk bonds) by the end of 2023 or early next year.
The government aims to sell five- and 10-year Islamic notes to attract both small and institutional investors.
In 2023, the Marcos administration has a target of $5 billion in commercial borrowing and has already raised $3 billion.
The remaining $2 billion may be raised through sukuk bonds, and US dollar notes.
The issuance of sukuk bonds is seen as a positive development for the country's Islamic banking and finance sector.
The government has been exploring the possibility of issuing sukuk bonds since 2018 to diversify the investor base.
PH seeks Islamic investors with 'sukuk' debut
At a glance
The Philippine government plans to borrow $1 billion from the Islamic debt market, marking the country's first venture into this type of financing, the Bureau of the Treasury said.
In a briefing in Dubai, National Treasurer Rosalia V. de Leon said that Manila aims to raise approximately P56.6 billion through Islamic bonds, also called sukuk bonds, before the end of 2023 or early next year.
“We’re now discussing with some of our potential underwriters in terms of the preparatory arrangements that we need to do, including the structure, whether it would be a hybrid—a wakalah, ijara, or murabaha,” de Leon said.
Sukuk bonds are like regular bonds, but they follow Islamic principles. Instead of earning interest, investors receive a share of profits from the assets or projects financed by the bonds.
De Leon stated that the government plans to sell Islamic notes with five- and 10-year maturities, which are appealing to both small and institutional investors.
“As for the timing, we've been told that there would have to be a 12 week preparatory lead time that would be needed,” De Leon said.
“So hopefully, we can do this before the end of the year or if ever, we'll have to have to slip to the first quarter of 2024,” she added.
The Marcos government intends to borrow $5 billion from commercial sources in 2023, and they have already obtained $3 billion of that amount to date.
De Leon said the government may raise $1 billion through sukuk bonds and an additional $1 billion through US dollar notes.
“We're looking and another billion dollar issuance and maybe this time around if we make it to the 12 week preparation time, then you'll be issuing a sukok structure bond,” the Treasurer said.
Bangko Sentral ng Pilipinas Assistant Governor Arifa A. Ala said the government's issuance of sukuk bonds is a positive step in advancing the growth of the country's Islamic banking and finance sector.
“Having a sukok being issued by our national government will send a strong signal that the Philippine is now ready to accept applicants, new players in the Islamic banking system,” Ala said.
Since 2018, the government has been considering the idea of issuing sukuk bonds as a means to broaden the country's investor base and promote diversification.