Government plans tax-exempt peso global bonds

MANILA, Philippines - The government wants to exempt from tax the planned peso-denominated global bonds it wants to issue this year to make the instrument more attractive to investors, Finance Secretary Cesar Purisima said yesterday.

National Treasurer Roberto Tan said the structure will be similar to the usual global bonds issued by the government, under which the foreign investor is exempt from tax payments as an incentive.

“It may follow the structure of a global bond but denominated in pesos (wherein) tax on foreign investor is assumed by the issuer just like the structure of dollar bonds,” Tan said.

The Aquino administration wants to issue peso-denominated bonds this year to cushion the economy from foreign exchange fluctuations and to take advantage of the general weakness of the dollar and the euro. The move is part of the government’s plan to manage the liabilities of the government.

Analysts said peso-denominated bonds are currently an attractive option for investors given the optimism on the new government and the general weakness of the dollar and the euro.

The Aquino government is looking at borrowing an additional P57.8 billion from domestic and foreign debt markets this year to fund a higher budget deficit of P325 billion, data from the Bureau of the Treasury (BTr) showed.

As such, the government is now eyeing to borrow P254.8 billion from external sources, or P34.3 billion higher than the original borrowing program of P220.5 billion, data also showed.

Similarly, the government will also borrow more from the domestic market this year, amounting to P511.6 billion or P23.5 billion more than the original borrowing program of P488.1 billion.


The plan to sell peso-denominated global bonds will come after the sale of roughly P20 to P30 billion worth of retail Treasury bonds (RTBs) slated in August. Banking sources said the government is looking at selling seven- and 10-year RTBs, starting with a possible price-setting auction on Aug. 10.

Earlier, the Development Budget Coordination Committee, the interagency group that sets the country’s macroeconomic assumptions, revised the budget gap to P325 billion from roughly P300 billion previously.

Despite a widening deficit ceiling for this year to P325 billion, the new economic team plans to cut the deficit to 3.3 percent of GDP next year and two percent in 2013 from this year’s 3.9 percent.
By Iris C. Gonzales (The Philippine Star) Updated July 30, 2010 12:00 AM

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