Long-term goal is to reduce risk exposure
The government is considering a double offer of dollar bonds and eurobonds in the first half of 2025 as part of its regular financing activities, although in amounts that should remain within the limits set for the Philippines’ offshore exposure over the medium term, Finance Secretary Ralph Recto said.
“I think it’ll be a mix but I leave the details in the meantime with the Treasury,” Recto told reporters at the Department of Finance (DoF) office in Manila.
Recto said various foreign financing options are being considered even as the government is working on reducing offshore exposure over the medium term. These options include eurobonds, environmental, social and governance-linked notes, as well as Sukuk, among others.
“We’re considering all of them, but we want to limit our foreign borrowings. We want to reduce that. So next year, I think it’s 75:25 (in favor of local borrowings), possibly even 80:20. I think the plan is to reduce that to 90:10,” he said.
Asked if this could possibly be achieved within the current administration’s term, or by 2028, the DoF secretary said: “Maybe even later. What is the end goal? To reduce your foreign exchange risk to 10 percent. The plan is there and we set that in motion. That’s the idea.”
Gross borrowings
Earlier, the Bureau of the Treasury (BTr) reported the national government’s gross borrowings in January to October rose 22.98 percent year-on-year, with both foreign and domestic financing posting double-digit increases.
Gross government borrowings in the first 10 months of the year swelled to P2.43 trillion from P1.98 trillion recorded a year earlier.
Gross domestic borrowings for the period accounted for the bigger chunk, at P1.86 trillion, up by about P34 billion from the year-earlier level of P1.52 trillion.
Meanwhile, the BTr data show that gross external borrowings for the period expanded 24.09 percent to P566.25 billion from P456.31 billion a year earlier.
Asked if Sukuk bonds would also be part of the regular financing activities, Recto said: “Yes, because there’s appetite, appetite for the Middle East. You want more people buying our bonds, our notes, and so on and so forth.”
Central bank policy rate
Recto agrees with the market consensus of a 25-basis point cut in the key interest rate that is expected to be announced after today’s Monetary Board policy meeting, he said in the same interview.
He said lower interest rates should boost investment in the country, as well as consumption.
“If your credit card interest rate was lower, you’d probably consume more too, right? So, more investment, more consumption,” the finance head said.
For 2025, Recto said there is a consensus of a further 75-basis point rate cut.
“My position was for a 100 (basis points). But it depends also on what happens, what the (US) Fed does. So we have to wait for the inflation numbers. Wait for what the Fed does, I suppose. But more or less, my expectation is 75 basis points,” he added.
