Manila, June 23, 2003 By Donnabelle L. Gatdula (Star) The National Government is looking at the possibility of tapping the international market anew to raise about $500 million of the $900-million remaining requirement for the year.

"The government is trying to gather bids and proposals for the new borrowings," a government official, who requested anonymity, said.

The source, who is privy to the government’s plan, said the NG is still studying what kind of instrument to use. "It is still undecided whether we can do global bonds," the source said.

The authorities, the sources said, are currently accepting proposals to prepare for the newest foreign transaction as the National Power Corp. (Napocor) is set to close its offshore deal this week.

Napocor, a state-run power firm, is currently in the market to raise a minimum of $500-million worth of bonds with an authority to bring it up to $750 million. Proceeds of the bond float will be used to settle its foreign debt falling this year. Total financing requirement of the cash-strapped utility firm amounts to $1.2 billion for 2003.

It was learned that Finance Secretary Jose Isidro N. Camacho has already informed Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura of the sovereign’s programmed foreign borrowings.

Buenaventura, in a separate interview, affirmed that he, already, held initial discussions with Camacho regarding the planned offshore transaction.

"This is a good time to borrow because the spreads have gone down. The market is liquid and fiscal data is improving and the economic data looks good with inflation below target," Buenaventura said.

As of last Friday, the premium of Philippine debt being traded in the international secondary bond market maturing in 2009 otherwise known as ROP09 has dropped by 17 basis points to 393 basis points over US Treasuries from 410 basis points the previous week.

According to government securities dealers, the fall or the narrowing of the spreads was brought about by the good fiscal numbers. Last week, Camacho announced that the fiscal deficit for the month of May was contained at P9.9 billion, bringing the five-month deficit position to P75.4 billion compared to P87-billion programmed level for the period.

Traders said the tightening in the premium of sovereign bonds will continue provided the fiscal authorities sustain the good revenue collection performance and restrain spending to keep deficit at desirable levels.

Buenaventura said the improvement would depend "on how firmly expenditures are kept in check".

The BSP chief has been saying that the fiscal authorities should proceed with the governments foreign financing requirements as programmed for the full year in order to prevent the further deterioration of the country’s balance of payments (BOP) position and the erosion of the dollar reserves.

From an original assumption of a small surplus, the BOP is projected to revert to a deficit of as high as $1.3 billion this year from a $660-million surplus in 2002.

The government is programmed to borrow about $2.4-billion offshore, of which $1.5 billion has already been completed, leaving about $900 million to complete the funding requirement.

These borrowings, however, are not enough to meet the $3.- billion maturing obligations of the state this year. The $2.4-billion financing requirement will only be for refinancing.

Camacho said the "very strong fiscal performance" of the government, particularly, in the last couple of month – April and May – "gives us strong flexibility" to draw-up its remaining financial requirement.

"We will consider borrowing options that are cost-effective for us whether domestic or foreign," the finance chief said.

Reported by: Sol Jose Vanzi

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