MANILA – Asian local government bonds will get more popular with investors in the next five years.
Debt rating firm Standard & Poor’s (S&P) said more investors will buy more of the debt as local government's improve financial management, transparency, and governance.
“As governments loosen restrictions—or prohibitions in some cases—on local and regional governments borrowing, we believe a sound borrowing and monitoring framework would boost the sustainability of local finances,” the debt watcher said.
S&P credit analyst YeeFarn Phua said that for national governments and investors alike, “improvements to local financial management practices, transparency, and governance will be key components of support for greater [LGU] debt issuance.
Local governments in Japan, South Korea, and India already sell bonds.
“Applying the above factors more broadly to other countries in Asia, in our view, those with a high likelihood of increased subnational borrowing in the next three to five years would also include China, Indonesia, Philippines, Taiwan, Malaysia, Thailand, and Vietnam,” Phua said.
The Philippine government has already tightened financial management of LGUs.
Last year, the finance department started requiring LGU's to submit statements on their revenues, expenses, and borrowing capacity. -- With ANC