The Philippine government on Thursday launched a benchmark-sized bond offering, its first offshore debt transaction this year.
The benchmark 10-year bonds represent direct, general, unconditional, unsecured and unsubordinated obligations of the Philippines, according to S&P Global Ratings.
S&P Global Ratings assigned its ‘BBB+’ long-term foreign currency issue rating to the US dollar-denominated senior unsecured bonds that the Philippines proposes to issue. It said they rank equally with the sovereign’s other unsecured and unsubordinated debt obligations.
Fitch Ratings also assigned the proposed US dollar and euro bonds a ‘BBB’ rating.
“The rating is in line with the Philippines’ ‘BBB’ Long-Term Foreign-Currency Issuer Default Rating [IDR], which has a stable outlook and was last affirmed on June 7, 2024,” Fitch said.
Officials did not specify the size of the offering, but Finance Secretary Ralph Recto earlier said in a Bloomberg interview at the sidelines of the World Economic Forum in Davos the government was planning to raise $3.5 billion in the first half of 2025.
“We’re only looking at tapping something like 3.5 billion dollars this year. Mostly dollar. There will be Euros I suppose, but mostly dollar. Like I said, it’s only roughly about 3.5 billion dollars,” Recto said.
Recto said the Bureau of the Treasury was in talks with eight banks to help with the foreign bond sale.
The BTr issues global bonds to fund the country’s budget. These include dollar bonds, euro-denominated bonds and samurai bonds.
The BTr issued in August 2024 a $2.5-billion triple-tranche of 5.5-year, 10.5-year and 25-year global bonds. The proceeds from the sale of these bonds will be used for general budget financing and refinancing programs. It also issued in May 2024 10-year and 25-year global bonds.
Recto said, however, the government would limit foreign borrowings to reduce the country’s exposure to foreign exchange risks. The recent depreciation of the peso against the US dollar bloated the foreign component of the government’s debt last year.
Data from the BTr showed the national government’s outstanding debt reached P16.09 trillion as of end-November 2024, up by 0.4 percent, or P70.70 billion, from the end-October 2024 level due to net financing and the impact of local currency depreciation on the valuation of foreign-currency-denominated debt.
The peso depreciated to 58.198 against the US dollar as of end-November 2024. It closed at 58.69 Thursday.
Recto said the government planned to focus more on domestic borrowing, with a financing mix of 80 percent domestic and 20 percent foreign this year. Gross borrowings are expected to reach P2.55 trillion this year.
“Most of, 80 percent of our borrowing is domestic. There’s a lot of domestic savings in the Philippines. There’s a lot of liquidity. It’s even cheaper for us to borrow domestically, frankly speaking. So we’re not so much concerned,” Recto said.
