Archive for the ‘My Report’ Category

My Report in MPA – Public Fiscal Administration



A unique strategy developed to help a debtor manage their debt. This strategy is usually developed and implemented by an outside company or organization on behalf of the debtor, usually because the debtor is unable to sufficiently manage their debt on their own, due to lack of knowledge or because they are overwhelmed by the amount of debt.


Includes determining the types of refunding to carry out, the types of securities to sell, the interest rate patterns to use, and decision making on callable issues. Since World War II, federal debt management has become an important Treasury function affecting economic conditions in general and money markets in particular. The economy and the money markets are affected in several ways by the large government debt. First, interest must be paid on government securities that are issue to finance the national debt, which now exceeds $7.5 trillion.


One of the basic objectives of debt management is to handle it in such a way as to help establish an economic climate that encourages orderly growth and stability.

Another objective of debt management is to hold down treasury interest cost. The influence of treasury policies may also tend to reduce all interest rates.


Debt Management Program in the Philippines


The first debt and debt service reduction operation the World Bank financed was the Debt Management Program Loan to the Philippines, approved in 1990. Its main objective was to help restore the Philippines’ creditworthiness by reducing the destabilizing pressures exerted by an excessive debt-service burden. The government, having inherited a huge debt service obligation, formulated a debt restructuring program for the country and a request for debt-relief from creditors, with assistance from the Bank and the IMF.


Several events helped improve the Philippines’ creditworthiness. Three of them are particularly relevant to the operation

1.            The government adopted a program of deep structural and macroeconomic reform.

2.            It reduced the debt stock by about $650 million equivalent, or about 2.3 percent of its outstanding debt at the time, using Bank and IMF financing to buy back $1.46 billion of debt from commercial banks at 50 percent discount.

3.            By signaling confidence in the Philippines’ commitment to sound macroeconomic reform, the Debt Management Loan opened up international financial markets for the country.

However, the program’s success also led to a new problem. It encouraged new loans and other inflows of capital, which eventually became a major source of monetary problems and instability. The resulting increase in inflation forced the government to rein in the economy, suppressing growth; the currency tended to appreciate and the new loans tended to substitute for public sector savings. Clearly, in debt restructuring exercises, foreign creditors must give only enough assistance to avoid destabilizing pressures; the full benefits of debt restructuring can be captured only in a stable economic environment.




In the ten years after 1986, when the Marcos regime fell, the Philippines has carried out a remarkable program of economic liberalization and modernization, initiated in the midst of a deep economic and political crisis that started in the late 1970s. The crisis had serious macroeconomic manifestations–including high inflation, large current account deficits, and huge arrears in external debt. But its source was the misallocation of resources embedded in the model of development then applied in the country, a model based on pervasive state intervention and overprotection of industry. Reaching a path of sustainable growth required both macroeconomic stabilization and deep structural reforms. By the mid-1990s, this transformation was well underway, aided by greater political stability.


The Debt Management Program Loan followed six other adjustment operations that the Bank carried out to help the country in this process. By 1986, the ratio of external debt to GNP in the Philippines had peaked at 97 percent (see Figure 1). To reduce the heavy debt-service burden– which was concentrated in the public sector–the government, the Bank, and the IMF agreed to combine general macroeconomic reform with a debt reduction agreement with the government’s creditors. The Debt Management Program Loan, complemented by other IMF and bilateral funds, provided $200 million in 1989-91 toward $1.46 billion of debt buybacks at a 50- percent discount from low-exposure commercial banks.


Economic growth and external debt burden


Project goals


The main objective of the loan was to help restore the country’s creditworthiness by reducing the destabilizing pressures that an excessive debt-service burden exerted on macroeconomic management. The loan was consistent with the Bank’s strategy of helping the Philippines to achieve a sustainable path of growth by making investments more efficient. It complemented ongoing Bank support to improve the government’s investment planning and procurement, liberalizing trade and banking, and continuing with privatization.




The debt reduction exercise started with a 1990 pilot program, which was supported by the Bank loan. The intention was to follow with a second, larger, debt and debt service reduction operation. However, the pilot program encountered two major problems–one related to the design of the Bank support and the other to the operation’s success in increasing capital inflows.


In the original design, the Bank had not intended to attach conditions to the operation, because debt reduction was meant to complement ongoing structural reforms, and those reforms were already being monitored by the preceding Bank loans. In the end, however, the Bank decided to attach similar conditions to the Debt Management Program Loan. But those conditions were unnecessary because they basically restated what was already covered elsewhere, and some of them entailed institutional changes that by definition take a long time to implement. They thus were not appropriate for an operation of a commercial type, which requires quick response to market conditions.


Added to this, the Bank applied its standard disbursement procedures, which are too slow for an operation requiring speed of action. These design flaws delayed disbursement, thus preventing the central bank from taking full advantage of rapidly changing market conditions.


The other serious problem was the effect that greatly increased capital inflows had on macroeconomic stability. The authorities could not foresee their own success when they began negotiating for additional capital as part of their debt reduction exercise. Facing uncertainty, it made sense for the government to err on the side of exaggerating the need for capital inflows. But as the debt reduction exercise coincided with falling US interest rates and a subsequent boom in private capital flows to developing countries, new loans began entering the Philippines in record volume, eventually becoming a source of financial instability. Partly for this reason, the Bank correctly decided not to participate in the second, larger, debt and debt service reduction operation. Providing even more balance-of-payments support would have increased inflationary pressures.




The Debt Management Loan helped improve the country’s creditworthiness in two ways. First, it reduced the burden on the government from external debt, which had produced destabilizing fiscal and quasi-fiscal deficits. Second, it signaled to international markets that the Bank trusted the policies the government was pursuing and was willing to increase its exposure in the country. This opened up international financial markets for the Philippines. Although the operation’s impact on institutional development was negligible, the operation was cost-effective.


The objective of reducing the debt burden was important and, on the whole, the outcome of the Philippines’ debt management program was satisfactory. In particular, the program helped to make Philippine investments more efficient, decrease the risk premium required for international financing of investments, reduce the external debt burden service to manageable levels, and attract large capital inflows. Equally important, these objectives were attained while the country was resolving serious political problems.


But the huge inflow of capital had a destabilizing effect on the economy in the 1990s. In response, monetary authorities found it necessary to adopt restrictive credit policies, which slowed economic growth. Fortunately, the government has recently taken corrective action to help stabilize the economy, thus creating a sounder basis for the resumption of foreign investment.




– The full benefits of a debt restructuring operation can be captured only in a stable economic environment. Aiming to maximize the volume of new lending to the debtor country in a debt reduction exercise can result in capital inflows greater than the country can safely absorb, leading to macroeconomic instability and the substitution of foreign savings for public sector savings.


– Increases in capital inflows should not be used as a measure of the benefits from a debt reduction exercise, for three reasons.


(1) The new resources are liabilities on the country’s balance sheet. Increasing indebtedness is a neutral activity; its value to the country depends on the use to which the new loans are put. In the Philippines in the 1990s, excessive capital inflows brought about serious macroeconomic problems.

(2) The dynamic benefits the new loans are supposed to measure–improved access to international financing–are captured by the reduction in the international risk premium (see box). The instability of the 1990s threatened the Philippine program’s sustainability, so domestic financial markets did not immediately benefit from the reduction in the risk premium imposed on the country in international markets.

(3) Excessive capital inflows can become destabilizing. The Bank should make sure that capital inflows are monitored and should suggest restricting those attracted by government negotiations when they become a source of instability.


– The Bank should adopt streamlined procedures for debt reduction operations. In debt relief and debt swaps, speed is important. Bank procedures caused delays, which prevented the Central Bank from taking full advantage of rapidly changing market conditions.


The causes of the declining risk premium on Philippine debt


The path of the decline in the risk premium on Philippine debt paralleled the decline in interest rates on the US dollar, which meant that the yield international investors required on Philippine debt fell from 17.2 percent in the first quarter of 1989 to 8.3 percent in the third quarter of 1993. There is no doubt that falling US interest rates had an important, positive effect on the outcome of the Philippine reform program. But two points must be kept in mind in analyzing cause and effect.


First, the risk premium fell only after the second, larger debt reduction exercise took place, in 1992. After the first debt reduction loan, the premium actually increased substantially, probably because of the slowdown in the nation’s growth rate and the outburst of macroeconomic instability in 1991-92.


Second, the decline in the risk premium coincided with a general increase in demand for investments in developing countries, largely associated with the decline in US dollar interest rates.


That is not to say that government action in the Philippines was no factor in the success of the country’s debt reduction program. For one thing, only countries that carried out credible efforts to stabilize their economies and made them more efficient shared in the boom of investment in developing countries. And changes in the discount applied to Philippine debt mirrored the country’s macroeconomic performance, increasing initially as performance deteriorated and then declining as the government established a credible stabilization program and began the second stage of its debt reduction program.










What is Public Debt? Meaning ↓


Public debt or public borrowing is considered to be an important source of income to the government. If revenue collected through taxes & other sources is not adequate to cover government expenditure government may resort to borrowing. Such borrowings become necessary more in times of financial crises & emergencies like war, droughts, etc.


Public debt may be raised internally or externally. Internal debt refers to public debt floated within the country; while external debt refers loans floated outside the country.

The instrument of public debt takes the form of government bonds or securities of various kinds. Such securities are drawn as a contract between the government & the lenders. By issuing securities the government raises a public loan & incurs a liability to repay both the principal & interest amount as per contract. In India, government issues treasury bills, post office savings certificates, National Saving Certificates as instrument of Public borrowings.




One of the primary purposes of long-term state and local borrowing is to allow governments to finance needed capital projects without causing burdensome changes in tax rates, fees or other charges. In theory, governments borrow for public purposes, i.e., to improve the quality of lives of the communities within their jurisdiction. Decisions such as the type of debt to be issued and who will repay the debt depend on political and economic factors.


Total Debt Outstanding by State and Local Governments (in billions of dollars):

  2000 1995 1990 1985 1980
Long Term 1,427.5 1,088.4 838.7 549.0 322.5
Short Term 24.3 27.0 19.3 19.6 13.1
Total 1,451.8 1,115.4  858.0 568.6 335.6

Source: 2003 Statistical Abstract of the United States




Governments usually finance expenditures of public sector capital or infrastructure by sale of bonds or through other forms of government borrowing. Bond financing, however, can be politically sensitive. Governments may often be able to make decisions about borrowing without being accountable to taxpayers – increasingly witnessed in public financing of prisons. Some public sector economists are of the opinion that in the absence of constitutional restraint, there is no guarantee that government borrowing will be used effectively. Abuse of government borrowing could also be controlled if well-informed taxpayers play a role in government decisions about public finance.






Philippines Public debt        

Public debt: 52.4% of GDP (2010 est.) and 54.8% of GDP (2009 est.)





                                                                        Public debt (% of GDP)


Country 2004 2005 2006 2007 2008 2009 2010
Philippines 74.2 72.3 61.6 55.8 56.3 57.3 56.5


Public debt: This entry records the cumulative total of all government borrowings less repayments that are denominated in a country’s home currency. Public debt should not be confused with external debt, which reflects the foreign currency liabilities of both the private and public sector and must be financed out of foreign exchange earnings.




Both debts are similar in that they withdraw resources from alternative uses, assuming full employment. The governments borrow when it suffers from revenue shortfalls in financing its varied activities or when it desires to stabilize the economy by holding on to the resources. Whether it spends the money or not, the thing to remember is that borrowing operation withdraws resources from alternative private uses and to that extent, diminishes the potential of the private sector in producing goods and services.


A Private firm borrowing from another likewise withdraws resources from their alternative use. On the other hand, they differ on many counts


  1. They are different in the manner of securing the resources for debt service. The governments utilize its vast compulsory power to tax whereas the private borrower has to rely on return from his investment.
  2. As a corollary consideration, repayment of debt can cause bankruptcy on the private debtor’s part if the returns are insufficient to cover repayments or his assents are destroyed by some calamity of sorts.
  3. Difference which is often cited in the “burden of future” generation issue is that private debt is a microeconomics concept while public debt is a macroeconomic concept.


Private debt is owned by one individual or group to another, parties which are distinct and separate units.

Public debt internal i.e., public debt is owned to ourselves, the economy or the country being viewed as an organic unit.




When we adopted a monetary base of intrinsically worthless paper money in the mid-20th century, we created a new paradigm that is still widely misunderstood.  The imperatives are quite different from those of the earlier gold-based system.  The key to maintaining the purchasing power of money is to control the price of credit.  That means controlling the cost to banks of acquiring the reserves of base money they need to back their lending.  It is up to the Treasury and Fed acting together to do that, and Treasury plays an indispensable role.


Generally speaking, governments borrow for any of the following reasons:


  1. To augment inadequate resources for normal housekeeping and to provide essential services such as education, health and sanitation, police protection, administration of justice, defense, and the like population growth and the rising trend towards industrialization and urbanization, and attendant problems have brought corresponding pressures on government resources to be channeled to these area.
  2. To finance participation in war.
  3. As a measure to stabilize the economy


The public borrows from banks in order to acquire transaction deposits (bank money) to spend on investment or consumption.  The government borrows from the public only to recapture its deficit spending.  Otherwise the money supply could grow too rapidly and create unacceptable inflationary pressures.

Government borrowing


The Public Sector Net Cash Requirement (PSNCR) is the combined financial deficit of central government + local government + the public corporations. It measures the annual borrowing requirement of the government sector in the economy.


















When the government is running a budget deficit it means that total public expenditure exceeds revenue. As a result, the government has to borrow through the issue of government debt.


If the government sector is taking in more revenue than it is spending, there is a budget surplus allowing the government to repay some of the accumulated debt, of perhaps cut the burden of tax or raise government expenditure. As the chart above shows – there has been a significant improvement in government finances in recent years. The government has run large budget surpluses in each of the last three financial years.



Measuring the PSNCR


The amount that the government has to borrow each financial year can be measured in a number of ways:


  1. Nominal PSNCR – is the total borrowing requirement in money terms making no adjustment for the economic cycle
  2. PSNCR as a % of GDP gives economists a good measure of the scale of the debt problem that may exist.
  3. Cyclically adjusted PSNCR takes into account the effect the economic cycle can have on the PSNCR. For example, in a recession the PSNCR nearly always rises automatically because of higher benefit payments and reduced tax revenues.


Budget Deficit and the National Debt


The public-sector net cash requirement is how much the public sector needs to borrow to finance its expenditure plans each financial year. It is borrowing by central government, by local authorities and by public corporations.


The national debt is the total amount of borrowing undertaken by central government which has not yet been repaid. In other words, it is the sum of all outstanding central government debt. In recent years the total national debt has started to fall following the movement into surplus on the government’s own financial accounts.



















The important question is what central government does with the money it has borrowed. When funds are allocated to public sector capital investment in roads, schools, hospitals and other items of infrastructure this enables the nation to increase the output it can produce. This will make it easier to pay off previous debts or to pay the interest on them.


However, a budget deficit has to be financed – normally through the issue of new government debt to the capital markets. For a government with a good credit rating, the sale of new debt is rarely a problem. Most financial institutions are happy to purchase debt because they regard them as assets on their balance sheets.


Secondly if there is a large pool of savings in the economy, the issue of government debt (which soaks up some of these savings) will have little impact on the ability of private sector businesses to find sufficient funds to finance their investment.


There are some economic risks associated with a high level of government borrowing:


  • If the economy has only a small supply of savings, increased government borrowing may force up interest rates and crowd out private sector investment
  • Higher borrowing in the long-run requires an increase in the tax burden – this may dampen demand and economic growth
  • If the national debt increases, annual interest payments on the debt goes up – money that might have been spent in priority areas


RP debt stock rise at end-August on more foreign borrowing


MANILA – The country’s debt stock as of end-August was 5.1% higher than what was recorded as of the same period last year as the government raised more funds to plug the widening budget deficit.


Data from the Bureau of Treasury showed, the Philippines’ outstanding debt amounted to P4.231 trillion as of the first 8 months of the year, P207 billion more than the P4.024 trillion as of the same period in 2008. The latest figure was also 0.2% or P10 billion higher than July’s P4.22 trillion.


The Treasury blamed the month-on-month increase in the debt on the depreciation of the peso and appreciation of third currencies against the dollar, and adjustments arising from the conversion of loans from multilateral lender Asian Development Bank.


At the end-August level, each of the 92.2 million Filipinos owed P45,889.


The Treasury said 55% of the total national debt came from domestic creditors while 45% was sourced from foreign ones.


Domestic debt declined 2.1% to P2.309 trillion as of end-August 2009 from P2.359 trillion as of the same month last year.


Foreign debt, on the other hand, soared 15.4% to 1.922 trillion from P1.665 trillion as the government floated more foreign currency-denominated bonds and availed of more official development assistance loans from multilateral institutions.


Last month, the Philippines, one of Asia’s largest sovereign debt issuers, sold $1 billion in 25-year global bonds, bringing to $3.25 billion its total foreign debt issues this year. A portion of the latest bond proceeds may be used to finance this year’s budget shortfall, which is expected to breach the government’s P250-billion fiscal gap ceiling.


The country may postpone a planned Samurai bonds issue to next year with the government and the Japan Bank for International Cooperation yet to agree on the guarantee pricing



            Deficit financing of government activities can create alarm in some circle due to the fear that the debt can saddle future generations with the burden of interest payments and amortizations.

The term “burden” merit clarification. Burden can be viewed in the light of the existence of the debt itself. “Real Burden” causing the loss or diminution of resources in private hands due to the incurrence of the debt, and as a result, less goods would be available than would have been if the debt were not incurred.

The burden of debt as debt can also viewed as direct or primary and secondary or frictional – direct or primary burden referring to the withdrawal of resources from private use and secondary or frictional referring to difficulties arising from transfer problems.


2010 burden: Philippine deficits and debts


MANILA, Philippines – Each Filipino now owes P47,039 to local and foreign creditors, based on the national government’s total debt stock as of September. A month before that, each of the 92.2 million Filipinos owed P45,889. The culprit: the widening budget deficit that prompts the government to borrow some more. Additional debts, which address current funding needs but could be paid in the future, translate to more debt burden for future generations. The fact that the Philippines have been spending more than it earns is not earthshaking. Even the richest of countries have budget gaps. But prudence dictates that this deficit, which is a fiscal policy issue, has to be manageable. Already, there are concerns about how the Philippines is faring as far as fiscal discipline is concerned. The Philippines blew past its P250-billion fiscal gap target for 2009, recording a deficit of P272.5 billion with one more month to go before the year ends. If this year’s experience is any guide, analysts believe the country’s 2010 budget deficit will also breach the government’s official target.

























Weak revenues—due to slower economic growth, several revenue-eroding laws, the negative impact of typhoons on tax collection, and lackluster privatization of assets—have been blamed for the wider-than-targeted deficit this year.


Except for privatization, which is expected to pick up steam, the same factors are seen to push the budget deficit above goal in 2010.


Despite the continued deterioration in the government’s fiscal position, analysts at some of the biggest banking institutions say it’s not as bad as it seems.


The government had set next year’s budget deficit ceiling at P233.4 billion, but the country’s economic managers are looking to increase this “to incorporate realistic assumptions.”


They said more revenue-eroding measures that will take effect next year as well as the lingering economic downturn will take toll on the collections of the government’s main tax agencies, the Bureau of Internal Revenue and Bureau of Customs.


The government is also expected to spend more for reconstruction efforts following back-to-back typhoons.


Taking these into account, Finance Secretary Margarito Teves said the actual 2010 deficit figure may hit close to P300 billion, the same as their “worst-case scenario” for the 2009 budget gap.


Teves’ forecast is in line with analysts’ consensus.


Not alone


Viewed in the context of the current economic crisis, financial experts say the country’s swelling budget shortfall is not worrisome at all.


Unlike in 2004, when the poor fiscal state of the country was a product of the government’s own hubris, the recent global crisis has made a large deficit more acceptable.


According to Metrobank head of research Marc Bautista, the country needs to incur a deficit to be able to sustain economic growth by curing sluggish demand through increased spending.


He noted that other countries are doing the same thing.


“There is room for deficit spending in 2010, the markets all but expect it already, and the Philippines are not alone in this predicament,” Bautista said.


DBS strategist Philip Wee, for his part, said the widening budget gap has not really affected the strength of the Philippines, given the country’s steadily rising external liquidity, and the peso’s stability.




Fiscal consolidation


Nonetheless, the Philippines are eyeing to wipe out its budget deficit by 2013.


The country first targeted to balance the budget in 2008, but pushed this goal back to 2010 due to adverse external developments, including the rise in commodity prices and the onset of the global financial crisis. The 2010 goal was pushed further to 2013 to accommodate deficit spending for the economy.


As the country consolidates its fiscal position, Teves said that the government’s debt as a percentage of gross domestic products will also drop to 46.1% by 2013 from the programmed 57.6% by end-2009.


Similarly, he said the consolidated public sector fiscal position—the combined fiscal positions of the government, state-owned agencies and government financial institutions—will post a surplus during that year.


In the end, the economic managers will be assessed on how they managed the country’s finances. After all, it is the future generations of Filipinos who will bear the burden of today’s folly.




Government spends P549-B in Jan-Sept to pay debts 2009


MANILA – The government spent a total of P549.016 billion in the first 9 months of the year to service its debts, up 2% from the P537.352 billion it spent in the same period last year.


According to the Bureau of Treasury, the increase was in line with the government’s efforts to consolidate its debts.


Of the P549.016 billion, the government spent P235.283 billion for interest payments, slightly higher than the P234.706 billion paid out in the same period last year, data from the Treasury showed.


Interest payments made to domestic creditors totaled P132.635 billion, down 6.1% from P141.327 billion last year.


On the other hand, interest payments to foreign creditors rose 9.9% to P102.648 billion from P93.379 billion a year ago. For principal payments, the government spent a total of P313.733 billion in January to September, or 3.66% higher than the P302.646 billion disbursed in the same months last year.


Principal payments to local lenders amounted to P226.378 billion, lower than last year’s P234.332 billion, while payments to foreign lenders rose to P87.361 billion from P68.314 billion.


For the month of September alone, the government shelled out a total of P61.277 billion to service its debts, up by 1.87%t from the P60.149 billion it spent in the same month in 2008.


The governments had programmed P698.5 billion in debt payments this year or an 8.7% increase from last year’s actual payout of P612.7 billion. It borrows mainly to finance the country’s budget deficit.


The government projects the deficit to hit P250 billion or 3.2% of gross domestic product this year

BSP: Higher borrowings won’t affect inflation


MANILA – An increase in the government’s foreign borrowings will not have detrimental effects on the country’s inflation rate, the Bangko Sentral ng Pilipinas (BSP) said on Friday.


According to BSP Deputy Governor Diwa Guinigundo, the government’s plan to issue up to $1.5 billion worth of yen-dominated bonds overseas will not create the kind of foreign exchange inflow that would significantly impact inflation.


He made it clear that the foreign exchange generated by government borrowing goes directly to the BSP and does not make it to the open market. Thus, he said, the additional foreign funds to be raised by the government will not affect exchange rates.


Guinigundo admitted, however, that the liquidity the borrowing would generate might have an incremental effect on domestic money supply. But he said this is being closely monitored by the BSP.


The government has to tap more borrowings to finance its budget deficit as tax revenues continue to dwindle because of the current economic slump.


The BSP reiterated that even with heavy foreign exchange inflows in the past, the country’s inflation rate has remained steady. It noted inflation only started to surge when oil and petroleum prices soared to record levels.


Philippine annual inflation eased to an 18-month low of 3.3 percent in May, below market estimates. With food and fuel price pressures easing, some economists said domestic inflation could fall to 0 percent.


The BSP has earlier ruled out the possibility of deflation even with the economy likely going into recession this year. It hinted of further monetary easing down the road.


“At the moment, we see inflation still trending downward, and falling to within target for both 2009 and 2010. While we have reduced our forecasts on inflation, we still don’t see a situation of deflation,” BSP governor Amando Tetangco said.


“As such, there is room for policy to continue to be accommodative. Our primary mandate is price stability, so monetary policy will continue to be determined by our assessment of the risks to inflation,” he added. With a report from ANC Business Nightly



DBP launches sale of Tier 2 debt papers worth P5 billion


We want to raise P5 billion from the debt sale, but we were allowed by the central bank to raise up to P7 billion,” DBP Treasurer Maria Teresa L. Quirino said in a telephone interview yesterday.


Investors may avail of the notes with a life of 10.5 years until March 15. The issue date is set for March 20.


Minimum initial placement for investors is P500,000 and may be increased by increments of P100,000 thereafter.


The debt papers, due in 2022 with a call option on the fifth year, will carry an interest rate at par with the 10-year papers’ secondary market rate.


At the secondary market yesterday, the 10-year securities were quoted at 4.9876%.


For his part, DBP President and Chief Executive Officer Francisco F. del Rosario, Jr. said: “Interest rate [of the papers] will be fixed until the maturity date or until the call option, [which is on the fifth year].”


“With the DBP strategy roadmap aligned to the priority thrusts of Pres. Aquino’s administration of poverty alleviation, job generation and good governance, the bank plans to provide its stakeholders a wider access to social services…” he said.


“DBP will [also] actively participate in the national government’s initiatives to finance infrastructure development projects, prioritize financing of environmental projects, address the basic needs of housing, health, education, livelihood, among others, and assist in the financing of MSME (micro, small and medium enterprise) projects,” Mr. del Rosario added.


The bank obtained Monetary Board approval for the debt sale on Feb. 2. BDO Capital and Investment Corp., BPI Capital Corp., Deutsche Bank AG Manila and ING Bank N.V., (Manila Branch) were mandated to be the joint lead arrangers of the Tier 2 sale. Multinational Investment Bancorporation was tapped to be a selling agent while Land Bank of the Philippines was mandated as a public trustee of the debt sale.


In March last year, DBP raised $300 million from the sale of 10-year global bonds.


Other banks that have tapped the debt market this year, so far, are Land Bank of the Philippines (Landbank), Security Bank Corp. (Security Bank), Rizal Commercial Banking Corp. (RCBC), BDO Unibank, Inc and Philippine Savings Bank (PSBank).


In January, Landbank raised P10.5 billion from the sale of 10-year unsecured subordinated debt qualifying as Tier 2 capital that yielded 5.875%.


Last month, Security Bank raised P5 billion from the sale of seven-year long-term negotiable certificates of deposit that carried a 5.5% yield.


RCBC raised $200 million from offshore markets from the sale of five-year unsecured fixed-rate notes with a coupon and yield of 5.25%.


BDO raised $300 million from both offshore and onshore markets from the sale of five-year US dollar-denominated fixed rate senior notes with a 4.5% coupon rate and a 4.625% yield.


PSBank raised P3 billion from the sale of unsecured subordinated notes qualifying as Tier 2 capital that yielded 5.75%. — Ann Rozainne R. Gregorio



National Government debt climbs to P4.951 trillion


MANILA, Philippines – The total outstanding debt of the government went up to P4.951 trillion at the end of 2011, latest data from the Bureau of the Treasury showed.


The end-December 2011 debt stock is 4.94 percent higher than the end-December 2010 level of P4.718 trillion as the government borrowed more from domestic and foreign sources, latest data also showed.


Theoretically, at this level, each of the 94 million Filipinos is indebted by P52,670.


Compared to the end-November 2011 level, the latest debt stock level is also higher by P18.82 billion or 0.38 percent.


Of the total debt, P2.077 trillion or 41.97 percent is owed to foreign creditors and P2.873 trillion or 58.03 percent is owed to domestic creditors.


Domestic debt increased by P155 billion from 2010 to 2011, data also showed as the government issued more Treasury bills and bonds that it redeemed during the period.


Similarly, foreign debt increased by P77 billion or 3.89 percent at the end of 2011 from the P1.999-trillion level at the end of 2010.


Compared to the end-November 2011 level, domestic debt as of end-December 2011 increased by P23.09 billion as the government borrowed more debt than it had paid off during the period.


Foreign debt, on the other hand, decreased by P4.22 billion from the end-November 2011 level “due to the P2.13 billion net depreciation of third currencies against the US dollar and net repayment of P9.67 billion.”


However, the Treasury said this was partially offset by the P7.13 billion depreciation of the local currency against the dollar.


The contingent debt of the government also rose to P573 trillion from the 2010 level of P549 trillion as the state guaranteed the debt of other government agencies.


The contingent debt is composed mainly of guarantees issued by the government.


The Aquino administration hopes to slash the budget deficit as a ratio of gross domestic product (GDP) to two percent in 2013 from the projected 2.6 percent this year.


This year, the deficit is projected to hit roughly P286 billion or 2.6 percent of GDP from the actual P197.8 billion or two percent of GDP recorded in 2011.













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