Govt eyes $500M OFW bond issue in 2018

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The government is considering issuing $500 million in retail bonds exclusively for overseas Filipino workers (OFW) next year, the Bureau of Treasury said on Wednesday.

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National Treasurer Rosalia de Leon said the bond will have to benefit the OFWs directly, providing them a safer, more secure, and higher yielding investment instrument option, unlike a previous issue of bonds that benefited their families in the Philippines.

“OFW bonds are something that we have to look into next year,” de Leon said.

The OFW bond would be similar to the multi-currency retail Treasury bonds (RTBs) that were offered onshore to OFW families in 2010, raising proceeds of about $350 million for the government.

“For the OFW bond, if [that’s what we decide to offer], that would have to be done offshore. Meaning to say, that it will have to be [issued]directly to the OFWs themselves. In the case of the 2010 offering, we issued that here [onshore]so it’s their families who were the beneficiaries of the bond itself,” she explained.

Benchmark size of the offer

The National Treasurer said the benchmark size of the proposed OFW bond offer will have to be set at $500 million, given the large market size of OFWs.

“I think there is a market, given the liquidity [from]the OFWs. It is to provide them a safer, more secure, and higher yielding instruments as well. Of course, for their investment appetite, we have to make sure what tenors they would like, what would be better, shorter end of the curve or something much longer, to serve their investment appetite,” she added.

Remittances from OFWs have been the main driver of the Philippine economy, equivalent to about 10 percent of the country’s gross domestic product. In the first four months of the year, personal remittances reached $10.02 billion, up 4.7 percent from $9.56 billion a year earlier.

Regulations at OFW host countries

Finance Secretary Carlos Dominguez 3rd said the government is looking to offer OFW bonds to Filipinos in Saudi Arabia and the United States.

“Obviously, it would be offered to [countries]where we have a lot of OFWs, so that would be Saudi Arabia and the US,” he said.

The government will have to secure the necessary licenses or approvals from such OFW host countries first, the same way it did for the multi-currency bond issue in 2010.

“There are approvals of licenses needed. We cannot go to Saudi Arabia and peddle the funds there without getting the approval of the government, their monetary authority,” he said.

Earlier, Budget Secretary Benjamin Diokno said the expected proceeds from the proposed OFW bonds will also help fund the government’s ambitious infrastructure program.

Under its “Build, Build, Build” program, the government intends to spend P8.4 trillion on infrastructure in the years of the Duterte government until 2022.

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