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By Maricel E. Burgonio Reporter
THE Monetary Board has approved a
government plan to prepay its remaining Brady bonds, a Bangko
Sentral ng Pilipinas official said Friday.
The Philippines sold the said
debt papers, which were named after former United States Treasury
chief Nicolas Brady, in the 1990s to retire IOUs that carried
heavier credit terms. Last year the Philippines began prepaying part
of this debt to further bring down the country’s debt service
costs.
BSP Deputy Governor Diwa C.
Guinigundo told reporters that the central bank’s policy-making
body allowed the Bureau of Treasury to exercise its call option and
prepay the remaining $126 million of the bonds in the second
quarter. These obligations are set to mature in December 2009 and
June 2010.
National Treasurer Omar T. Cruz
earlier said the government may exercise its call option in April.
Last year the government prepaid
$575 million of the Brady bonds, the most recent in November at
$165.3 million. The first tranche at $410 million was settled
in June last year.
Including other debts, the
government has prepaid about $3 billion of its external obligations,
resulting in substantial savings last year.
The prepayment is part of the
government’s debt management strategy to reduce dependence on
foreign borrowings and cut the cost of its external debt service.
With the planned third tranche in
the second quarter, the government would have made $701 in
prepayments.
The government plans to tap the
huge domestic liquidity for the prepayment. A strong peso and a
narrowing budget gap has allowed it to trim its obligations ahead of
schedule.
The Philippines last year cut its
fiscal deficit to way below the P125-billion ceiling on account of
the Congress’ failure to pass the general appropriations bill for
2006. This allowed the government to operate on a smaller budget.
US-based investment bank Merrill
Lynch, however, said the government may exceed its fiscal deficit
target this year due to the absence of new tax measures and increase
in capital spending.
Based on its latest report, the
securities firm said the Philippine fiscal deficit would reach P88
billion this year, P25 billion more than the government’s ceiling
of P63 billion.
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