Government builds up cash

PHILIPPINES - In Brief 28 Apr 2020 by Romeo Bernardo
The Philippines today raised US$2.35 billion from international capital markets, priced at T+180 for a $1-billion 10y bond and 2.95% for a $1.35-billion 25y bond, the “lowest ever coupon” for both maturities per the National Treasurer. The borrowings come on top of some $1.8 billion secured recently from multilateral agencies, ADB and the World Bank, to finance government’s fight against the covid-19 pandemic. All told, these borrowings, equivalent to about P210 billion, arm the government with needed cash at a time when spending requirements are high and tax receipts have disappeared with economic activity. Government’s increased reliance on external sources of funding to finance a higher expected budget deficit this year is in line with BSP efforts to flood the domestic market with liquidity, relax monetary conditions and encourage banks to, in turn, lend to cash-strapped firms. Government had earlier entered into a short-term P300 billion repurchase agreement with the BSP which avoided a spike in domestic interest rates.

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