Bureau of the Treasury

MANILA, Philippines—Additional borrowings in February jacked up the pile of outstanding locally-issued government securities, or debt papers, to P8.11 trillion, the latest Bureau of the Treasury (BTr) data on Wednesday (March 9) showed.

The total face amount of outstanding T-bills and bonds as of last month rose from P8.07 trillion in January, but remained below the record P8.17 trillion in end-2021.

Owing to their shorter maturity, outstanding T-bills further declined to P719.6 billion in February from January’s P744.6 billion. Treasury bonds increased to P7.39 trillion from P7.32 trillion in January after the BTr sold at least P35 billion in long-dated IOUs weekly last month.

So far in March, the BTr refused to borrow a total of P100 billion out of the P250-billion domestic financing program for the month. Four BTr auctions had fallen victim to higher borrowing rates wrought by uncertainties from Vladimir Putin’s invasion of Ukraine.

Finance Secretary Carlos Dominguez III and the BTr had nonetheless assured that the P457.8 billion raised from five-year retail treasury bonds (RTBs) settled early this month would suffice to fund government budgetary requirements.

The Philippines borrows more locally mainly through treasury bills and bonds to temper foreign exchange risks while taking advantage of flushing liquidity in the financial system. Out of the P2.2-trillion borrowings programmed for 2022, three-fourths will be from the domestic debt market, the BTr had said.

BTr data had shown that out of the national government’s record P12.03-trillion outstanding debt as of January, P8.35-trillion worth—or 69.4 percent—were peso-denominated. By type of instrument, debt securities issued here and abroad amounted to P10.06 trillion, while loans from bilateral development partners as well as multilateral banks accounted for the remaining P1.97 trillion.

In terms of maturity, long-term debt amounted to P7.93 trillion (67.6 percent of total); medium-term obligations maturing between one and 10 years reached P3.05 trillion (26 percent); and short-term debt that matures in less than a year amounted to P744.6 billion (6.3 percent).

In an economic bulletin also on Wednesday, Gil Beltran, the Department of Finance’s (DOF) chief economist and retired undersecretary, said peso-denominated bonds issued by Philippine corporations dropped to P1.42 trillion last year from P1.61 trillion in 2020, reversing the upward trend pre-pandemic.

Amid the prolonged COVID-19 catastrophe, “corporations (including financial institutions) tapped more foreign currency bonds for their financing requirements,” Beltran explained.

While peso-denominated government-issued bonds still dominated the market with an 82.8-percent share of the 2021 total, Beltran noted that “the share of corporate bonds gradually increased as market liquidity improved and the government addressed the fiscal distress in the early 2000s.” Twenty years ago in 2001, a mere 0.3 percent of local currency bonds were issued by private corporations.

Last year, a total of P9.79-trillion worth of bonds—a record—issued in the Philippines were denominated in the local currency, Beltran said, citing the latest data from the Manila-based Asian Development Bank (ADB). Out of the 2021 total, corporate bonds accounted for 14.5 percent. The Bangko Sentral ng Pilipinas (BSP), which started issuing its own securities in 2020, had a 2.7-percent share.

“The ability to issue local currency bonds is a reflection of investor confidence in an economy,” Beltran said.

“Whereas corporations relied more on foreign currency bonds for additional financing requirements until the first few years of the new millennium, the country’s strengthened macroeconomic fundamentals thereafter enhanced the business environment for issuing local currency bonds,” Beltran added.

“Using government securities as benchmark, the local currency bond market expanded, enabling corporations to issue similar bonds, thus reducing reliance on foreign currency bonds and diversifying their risks,” he said.

According to Beltran, “higher sustainable growth levels and faster economic recovery translate into greater financing needs.”

“Once signed into law, the amended Public Service Act, together with the recently approved amendments to the Foreign Investments Act and the Retail Trade Liberalization Act, will have added a very potent ingredient to the economic recovery cocktail, which already includes the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and the ‘Build, Build, Build’ program,” Beltran said.


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