PH eyes USD 1.5-B global bond to fund spending

MANILA, Philippines – The government is eyeing to raise up to $1.5 billion from global bonds to raise funds for its spending plan this 2012.

On Wednesday, Jan. 4, 2102, a finance official told Bloomberg that the dollar-denominated bond will likely have a 5.25% yield.

Finance undersecretary Rosalia de Leon said the bond offer would be based on overseas market demand for a 25-year issue, given the impact of the euro zone’s sovereign debt woes.

The funds will pay for the recently announced P142 billion ($3.2 billion) budget for infrastructure projects, including roads, ports, school buildings. Most of these were planned but were not implemented in 2011 as the Aquino government pursued basic governance checks.

These crucial infrastructure projects, which account for 78% of the country’s public works spending budget this 2012, are expected to boost economic growth. When spending fell 7.3% in Jan-Sept 2011, the Philippines experienced an economic  growth slowdown. GDP grew by only 3.2% in the first nine months of 2011, bringing many to doubt if the government can meet its target growth of 5%.

To plug its budget deficit and secure lower borrowing costs for its foreign loans, the Philippines has sold global bonds every January in the last six years.

According to Reuters, the Philippines sold $1.25 billion in 25-year peso-denominated global bonds in the first week of January 2011. It also raised $1.5 billion in 15-year dollar denominated bonds in March 2011.

The government plans to raise over $2 billion from overseas bond sales this 2012, of which 75% will come from the domestic market.

The Philippines is rated one notch below investment grade by Fitch, while Standard & Poor’s in Dec. 2011 revised its outlook on Philippine debt  to positive from stable.  – Rappler.com