MANILA, Philippines - The government is again looking at prepaying its offshore loans by buying dollars from the country’s international reserves, an official said yesterday.
“We are looking into that. We are studying whether it would be feasible for us to prepay our loans,” Finance Undersecretary Rosalia de Leon told The STAR.
Back in 2010, the government shelved plans to prepay its external obligations as it would be costly for it to do so given that most loans were in the form of official development assistance (ODA) from multilateral agencies, which have longer maturities and lower interests.
De Leon said this time the government is looking at how it can match the tenor of most ODAs, most of which are due in 30 to 40 years, with its cash position.
“We are looking at how we can match it. These concessional loans have 30 to 40 years in maturity with low interests. If we are going to prepay, we will have to issue locally and convert the proceeds to dollar by buying from BSP (Bangko Sentral ng Pilipinas),” she explained.
“But we have short-tenors here. So we are looking at how we can match these things out,” she said, declining to elaborate.
National Treasurer Roberto Tan, in a phone interview, confirmed De Leon’s statements, but declined to provide further details.
The country’s gross international reserves ballooned to $79.3 billion as of July after BSP bought dollars to tame the strength of the peso, which has risen by 5.1 percent since the beginning of the year. The July figure was way above the BSP’s 2012 forecast of $77.5-$78 billion.
BSP Deputy Govenor Diwa Guinigundo said the central bank will be ready to provide dollars to the government. “We can always sell the foreign exchange the National Government would require to service its external debt obligations,” he said in a text message.
De Leon said there is no definite time for the prepayment yet, noting that another buyback may come first.
After shelving prepayment plans two years ago, the government resorted into swapping $1.5 billion worth of dollar bonds with global peso notes in October last year to reduce its foreign exchange risk.