Barclays: PHL likely to resume foreign borrowing in 2012

The government would most likely tap the debt market next year instead of borrowing its remaining $500 million foreign debt needs for 2011, predicts a global British investment bank. Barclays Capital in its latest report said the Philippine government can choose to postpone its plan to fulfill its remaining foreign commercial borrowing requirement for the year considering its strong cash position. Barclays Capital is the investment banking division of Barclays Plc which primarily deals in US Treasury securities and various European government bonds. “We believe that the government's ample cash position also means that the additional $500 million external issuance planned for 2011 will probably not materialize and the proposed dollar-debt swap will likely be pushed into next year," Barclays Capital said. The global securities research firm was referring to the government’s dollar-debt swap plan which authorities had earlier mentioned as part of government efforts to lengthen the Philippines’ debt maturity profile. As for external financing, Barclays Capital sees government's borrowings leaning heavily on peso-denominated notes. “Although the medium-term plan of the sovereign is to develop a full GPN curve (currently 10 year and 25 year only), for 2012 we think issuance will focus on the existing tenors," the report said. Barclays sees as unlikely that the Philippine Treasury would reduce its onshore local-currency issuance and keep the current size of its local auctions. “The government’s financing plans remain on track, and it is in a flush cash position. Although the Treasury will not cut onshore local-currency issuance, our sense is that its bias will be to not increase the size of local auctions and buy back onshore local currency bonds to reduce liabilities and negative carry," said the Barclays report. Government’s budget deficit projection remains at P300 billion despite under-spending during the first half, but Barclays predicts that the 2011 deficit would end at P250 billion. “Although we believe capex [capital expenditure] disbursals in the second half will be higher than in the first half, meeting the annual target will be challenging. Our budget deficit forecast stands at P250 billion (2.5 percent of GDP), and we see the risks as biased to the downside. For 2012, the government's budget deficit projection is P286 billion (2.6 percent of GDP). We believe this is attainable as systems put in place this year will allow faster disbursals of capex in 2012," the report said. — MRT/VS, GMA News