Gov't eyes retiring more Brady bonds

The government is considering retiring more Brady bonds this year as the country moves away from foreign debt exposure and shifts to domestic borrowings. The government is looking at the move to bring down the country’s debt levels, lower interest costs, and reduce dependence on foreign borrowings. Last year, the country paid $575.3 million of the Brady bonds, or 83 percent of the total. It retired $410 million in June and another $165.3 million in December, leaving a balance of $126 million. National Treasurer Omar Cruz told reporters that the government is looking at all its options on the remaining Brady bonds, which would have a call option, or can be bought back, in May. “We will take advantage of every opportunity either through prepayment or buyback," Cruz stressed. The Brady bonds retired last year include floating rate bonds due in December 2009 and June 2010 as well as interest reduction bonds set to mature in December 2007 and June 2008. The country has executed three bond exchanges to retire $1.58 billion worth of Brady bonds. The Philippines issued $3.35 billion worth of Brady bonds in 1990-1992 that were due to mature at the end of 2017. The government’s strong cash position mainly brought about by improved value added tax (VAT) collections has allowed it to free up more funds to pare down its debt. It expects the budget deficit to range from P80 billion or 1.3 percent of gross domestic product (GDP) to P90 billion or 1.5 percent of GDP last year instead of the original target of P125 billion or 2.1 percent of GDP. It hopes to further trim the gap to P63 billion or 0.9 percent of GDP this year. The government hopes to bring down the country debt to GDP ratio to 62 percent of GDP this year from 68 percent last year. The country’s debt stock stood at P3.914 trillion as of October which 55 percent came from domestic sources while 45 percent were sourced from foreign creditors. The government plans to borrow $2.466 billion from foreign sources this year. It floated $1 billion worth of bonds earlier this month, while $1.466 billion would be sourced from multilateral lending agencies such as Asian Development Bank, World Bank, Japan Bank for International Cooperation in the form of official development assistance (ODA). It also intends to borrow P260 billion from domestic creditors through the auction and over-the-counter sale of treasury bills (T-bills) and treasury bonds (T-bonds). This would translate into a borrowing mix of 67 percent from domestic sources and 33 percent from foreign creditors. -GMANews.TV