Dollar Bonds Being Considered for Additional Borrowings

According to Finance Secretary Carlos Dominguez III, the Philippines aimed to raise funds for the continued fight against the pandemic through US dollar-denominated global bonds.

“We will tap the US bond market before rates skyrocket,” Dominguez said without any specifics regarding the amount or when the bonds would be offered.

In the previous week, the Philippines also raised approximately $500 million worth of yen-denominated bonds at zero-coupon. The country had already ventured into dollar bonds twice in 2020 for its financing needs.

This year, the national government had already planned on a total of ₱3.03 trillion in borrowings, the bulk of which will come from local sources. External financing will account for a gross amount of ₱ 442.4 billion.

The additional borrowings for this year would increase the debt-to-gross domestic product (GDP) ratio to 57%, which will be a new high. Dominguez said the Philippines will cap debt to 60% of GDP.

In 2019, the debt level reached a record low of 39.6% before spiking to a 14-year high of 54.5% in 2020. Regardless of the expected peak in 2021, economists indicated that credit rating agencies and multilateral lenders would only show concern when these figures exceed 60%.

Public debt hit a record of ₱ 10.41 trillion in February, but Dominguez said the government had no plans of introducing new taxes in 2021 to help repay obligations.

“Although I must confess that yesterday, I talked to our staff and said, ‘you know, we have to start thinking of winding down this debt.’ Sometime next year, we have to look at potential revenue sources. So we’re working on it right now,” Dominguez explained.

Source: Inquirer