Despite a recent $1-billion global bond float and a P50-billion reconstruction bond issue, the government said it was still planning a Samurai bond sale this year to help plug a runaway budget blowout that is expected to hit at least P300 billion by the end of the year.The Japan Bank for International Cooperation (JBIC) has guaranteed up to $1 billion of the government’s planned yen bond sale within two years, but the JBIC and the government have yet to agree on guarantee pricing.
The government had asked JBIC to lower the guarantee cost to make the bond a cheaper source of financing.
The government has already sold $1 billion worth of US bonds last week to raise some much-needed cash, bringing its total sovereign debt sales this year to $3.25 billion.
The government said weak revenues resulted in a budget deficit of P27.5 billion in September, which took its nine-month shortfall to 95 percent of its full year goal.
Finance Secretary Margarito Teves said the government is still banking on asset sales to keep the budget deficit to within P250 billion or 3.2 percent of gross domestic product (GDP).
The deficit soared to P237.5 billion in the nine months to September, up 345 percent from a year earlier and P19.9 billion over the government’s target ceiling.
“We are really facing tough times,” Teves said as he announced the government was considering selling assets to help balance the books.
“Our revenue collection efforts are seriously hampered by the slowdown in economic activities and tax breaks that were granted largely through legislation.”
Teves, however, said the government had to find extra money to pay for reconstruction programs after tropical storm “Ondoy” and typhoon “Pepeng” caused billions of dollars in damage on the main island of Luzon over the past month.
“We need to spend for the urgent needs of our people, especially for the relief and rehabilitation of calamity-stricken provinces,” he said.
“Millions of crops were damaged and a number of bridges were destroyed. We need the resources to rebuild and fortify our economy.”
Ondoy pounded Metro Manila with the heaviest rains in more than four decades on Sept. 26. Pepeng then struck on Oct. 3, destroying crops and triggering landslides across the mountainous north of Luzon.
Aside from destroying rice farms, fisheries, roads, hospitals and bridges, the storms claimed nearly 1,000 lives.
Teves said the government was looking at selling state assets to further fund reconstruction efforts.
“We remain hopeful that we will be able to dispose of government assets before the end of the year that could help us generate additional revenues for our rehabilitation and reconstruction efforts,” he said.
Analysts doubt the government would be able to sell state assets before the end of the year, after an auction of a 103-hectare commercial property earlier this month failed.
“I’m actually very surprised by an even wider deficit in September compared to the previous month,” Euben Paracuelles, economist at Royal Bank of Scotland, said.
“The good news is the $1 billion was already out of the way so fiscal financing risks are relatively small,” he said.
National Treasurer Roberto Tan said on Sunday the government may use a portion of the proceeds from its $1-billion global bond, its third issue this year, to fund its 2009 budget gap.
Philippine domestic bond yields climbed 5 to 7 basis points after the budget data, reflecting doubts in the market about the government hitting its 2009 budget deficit target.
Source: http://www.tribune.net.ph/business/20091021bus1.html
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