Gov’t cuts outstanding foreign debt by $1.5B
Retires dollar, euro bondsBy Ronnel W. Domingo
Philippine Daily Inquirer
November 19, 2012 at 1:14 am

The government has reduced its outstanding foreign debt by $1.5 billion, or P61 billion, as it retired dollar and euro bonds, riding on the rising international confidence on the Philippine economy and the continued strong run of the peso.

Finance officials said they expected to have paid such amount after the government’s buyback offer closed last Friday.

Finance Secretary Cesar V. Purisima said in a statement that reducing the foreign currency component of the country’s financial obligations was part of the strategy to manage state liabilities.

“The tender offer and the recent peso-denominated global bond offering, aided by positive market conditions and strong liquidity position, allowed the (Philippines) to manage its external liabilities through the redenomination of a portion of the external debt into the local currency,” Purisima said.

He was referring to the repurchase as well as the issuance of $750 million (P30.8 billion) in so-called global peso notes, which was undertaken earlier this month.

Proceeds from the float of peso-denominated global bonds are partly funding the buyback of dollar and euro bonds. Investible funds held by the Bureau of the Treasury are covering the remainder.

National Treasurer Rosalia de Leon said the recent efforts would help reduce interest costs, spread out maturities and extend the pay dates in the national government’s debt stock.

The recent forays in the global commercial debt market also came after attaining credit ratings of one notch below investment grade from all three major international rating agencies—Fitch Ratings, Moody’s Investor Service and Standard and Poor’s Ratings Services.

“We are rebalancing the [country’s] external liabilities to reduce exposure to exchange rate risks,” Purisima said. “We believe that this rebalancing, in turn, will help position the country for further positive ratings action by the credit-rating agencies.”

Treasury data showed that the debt stock has reached P5.21 trillion as of the end of September. Of the amount, 39 percent or P2.03 trillion was booked in foreign currencies such as the dollar, euro and yen.

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