By LEE C. CHIPONGIAN
The National Government (NG) will offer few but bigger and longer maturing bonds next year at the same time favoring more peso borrowings rather than foreign loans if the strong dollar inflows are sustained, National Treasurer Omar Cruz said yesterday.
"I am managing the duration of tenors (bond sale next year) it will be fewer and bigger volumes," Cruz told reporters, on the sidelines of ceremonies launching the RoSS-Philippine Dealing System & Holdings Corp. operational connectivity at the Bangko Sentral ng Pilipinas complex late Thursday.
Cruz maintained that the NG borrowing profile in 2006 on paper, is 58:42 but the ratio usually changes towards the middle portion of the year. "If the dollars come in and the strong inflows are sustained, then we will get more peso borrowings."
"We will continue to issue longer-term bonds and if flows continue then it is incumbent for us to do the swap approach (but) we go with the market," the Bureau of Treasury chief said. Market dictating forces include the level of remittances from overseas Filipino workers, foreign investment flows and US dollar interest rates.
Next year total government – including BSP will have maturing loans worth $5 billion. It will have to borrow $3.1 billion to finance dollar requirements.
Politicians such as Rep. Joey Salceda said the government could afford to borrow less than this amount or about $2 billion, since dollars will continue to swap the market from migrant workers’ remittances, portfolio investments and exports.
However Cruz said they will tap what the NG program allows, but perhaps they will get more from domestic sources to lessen the foreign exchange risks.
This year the government’s borrowing profile favored more foreign borrowing. Department of Finance officials’ proposed borrowing mix for 2006 favors more domestic sourcing of course. But the DoF is pushing for a 22 percent foreign and 78 percent domestic NG gross financing mix while the BSP wants to revive the 45-55 mix.
In the meantime the government will temper its foreign borrowing next year. The Budget department said it would make sure that dollar sourcing would not exceed 50 percent of total borrowings.
The NG foreign borrowings hike reserve assets as measured by the gross international reserves monitored by the central bank. Both the NG and BSP dip into the GIR for debt service requirements. As of November the GIR level stood at $18 billion.
The BSP maintains that current GIR figure is at comfortable levels. In short, the country’s GIR level is enough to meet requirements for short-term obligations. This also means there are no shortage of dollars.
Majority of government debt servicing is dollar-denominated.
