The government is eyeing to limit its foreign borrowings to minimize exposure to foreign exchange risk, Department of Finance (DOF) Secretary Ralph Recto said.
In a recent press chat, Recto said while the government is considering the issuance of several bonds including Euro, Yen, Sukuk or Islamic bond, and Dollar, the plan is to reduce foreign borrowings to as low as 10 percent.
“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. Possibly even 80-20,” said Recto.
Gross borrowings are expected to reach PHP2.570 trillion this year and slightly decrease to PHP2.55 trillion in 2025.
The government plans to focus more on domestic borrowing, with a financing mix of 75 percent domestic and 25 percent foreign this year, shifting to 80 percent domestic and 20 percent foreign from 2025 to 2028.
“I think the plan is to reduce that to 90-10. Not next year but over the medium term,” Recto said.
“Maybe even later [than 2028]. I don’t think we can do it all the way to 2028. But let’s say if you have a 70-30 borrowing mix, then 75-25, it will be 80-20, and then 85-15. So, what is the end goal? To reduce your foreign exchange risk to 10 percent,” he said.
Recto said that while the 90-10 borrowing mix will likely be implemented by the next administration, “the plan is there and we set that in motion.”
Bond issuance
On the bond issuance, Recto said the government is looking at the possibility of a Euro and/or Dollar bonds in the first half of 2025.
He said the Bureau of the Treasury (BTr) is looking at incorporating Sukuk or Islamic bond, and yen-denominated bond issuance in its financing strategy next year.
“Because there’s appetite, appetite for the Middle East. You want more people buying our bonds, our notes, and so on and so forth. If they’re willing to finance government operations, why not,” Recto said.
Last year, the Philippine government raised USD1 billion from selling its maiden Sukuk bonds.
For the Yen-denominated bonds, Recto said this will allow the Philippines to be on the radar of Japanese investors.
“I think it’s an opportune time that the Yen is depreciating. So, pabor sa atin yun (so that’s in our favor) if we borrow from them, they’re depreciating you know. But more importantly, I think you want to be on the radar screen of investors from Japan,” Recto said. (PNA)
