RCBC chief economist Michael Ricafort (File photo)

MANILA – Improved fundamentals and proven economic resiliency allowed the Philippines to successfully tap new foreign fund sources to boost financing for various programs this year, an economist said.

This, after the Bureau of the Treasury (BTr) announced on Thursday that the government was able to raise a total of EUR2.1 billion (about PHP122.4 billion) from the issuance of multi-tenor euro-denominated debt papers.

Specifically, the government issued a EUR650 million four-year bond, EUR650 million 12-year bond, and EUR800 million 20-year bond. These are all fresh issuances.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to e-mailed questions from the Philippine News Agency (PNA), said “the latest euro-denominated bond sale of the Philippines effectively hedges and diversifies the country's total borrowing requirements for the year.”

He said the said issuance allowed the government to better manage foreign exchange risks and hedge “to partly finance the budget deficit and somewhat reduces the need for the government to borrow from domestic sources.”

He said the government also benefited from the near-record-low interest rate environment in Europe, and in Japan when it issued the yen-denominated Panda bond last March while ensuring presence in the global bond markets.

“Improved credit ratings of the Philippines, despite the Covid-19 pandemic that resulted in downgrades in other countries, have indeed helped in further reducing the borrowing cost and also at the same time effectively allowed a larger spectrum/roster of international investors to invest in the country, with much better terms as well,” he said.

He added that the government is in a “delicate balancing act to manage the country's fiscal performance in terms of better managing the budget deficit and debt-to-GDP ratios, while also supporting economic recovery prospects, in able to help sustain the relatively favorable credit ratings for the country.”

In a statement, BTr said the four-year paper fetched a coupon rate of 0.250 percent, the 12-year paper, 1.200 percent; and the 20-year paper, which is the longest tenor euro-denominated issuance to date of the Philippines, 1.750 percent.

“All tranches tightened by 25 bps (basis points) from the initial price guidance backed by a strong orderbook which allowed the Republic to revise its price guidance twice across all three tranches,” it said.

Finance Secretary Carlos G. Dominguez III, in the statement, said the country’s second foreign currency issuance this year “reflects the investor community’s confidence in the country’s prospects for a strong recovery from the prolonged pandemic, given that its financial readiness has allowed the government to do whatever Covid-19 response measures are necessary to save lives and revive the economy.”

“Investors apparently believe we have what it takes to ride out the Covid-19 crisis on the strength of the fiscal discipline that has been maintained and the tax measures plus other reforms that have been carried out by the government since President Duterte assumed office five years ago,” he added.

Also, National Treasurer Rosalia de Leon said the latest issuance is the fourth for the government since the pandemic hit and “serves as affirmation that we are on track to emerge from this crisis as a stronger and more resilient economy.”

“Further, the ability to stretch our maturities to the 20-year tenor at tight pricing underscores that investors are indeed taking a long view on our return prospects,” she added.

The government tapped BNP Paribas, Credit Suisse, Goldman Sachs, J.P. Morgan, Nomura, and Standard Chartered Bank as joint lead managers and joint bookrunners for the issuance. (PNA)