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Debt maturity grows longer in 2010

THE maturity profile of the Philippines’ debts lengthened by nearly a year, giving the government leeway to settle its liabilities.

Data from the Bureau of the Treasury revealed that the government’s average debt maturity increased to 8.8 years in December 2010 from 7.9 years in June last year.

Average maturity for domestic liabilities rose to 6.66 years from 5.45 years, while foreign debts increased to 11.37 years from 10.8 years.

Department of Finance Secretary Cesar Purisima attributed the additional time for Philippine debt settlement to the “bond swaps the [Aquino] administration undertook since its assumption.”

“Lengthening our maturities has been one of our key goals and we are happy that steps we undertook since July last year are now bearing fruit,” Purisima said.

As a result of a lengthened debt profile, “there is more time to improve the economy so that by the time our debts mature, we will have enough capacity to settle them,” he said.

“There will also be more resources for the government to undertake infrastructure projects and social programs to contribute to economic growth and the government’s drive against poverty,” he said.

Last year, the Aquino administration undertook two bond swaps in the domestic and international markets.

The global bond swap conducted in September issued $3-billion worth of bonds that would fall due in 2021 and 2034. It also sold $200-million worth of bonds due in 2021.

The local bond exchange in December swapped P199.46-billion worth of 10- and 25-year bonds for maturing liabilities. A total of P33.45-billion worth of 10-year bonds and P166-billion worth of 25-year bonds were swapped.

National Treasurer Roberto Tan said the government has “no target average maturity” but will “continue to undertake measures” to improve government’s debt position.

Among these measures are the extensive use of official development assistance, which has longer maturities.

“We have been stretching tenor of our borrowings to as long as 25 years which is the longest provided under the law,” Finance Undersecretary Rosaria de Leon said.

The government’s debt stood at P4.740 trillion in January this year, higher than the P4.718 trillion last year yet resulting in debt-to-gross domestic product ratio of 55.4 percent, the lowest since the 53.3 percent in 1998.

The government borrows from the domestic and international markets to make up for tax collection shortfalls.

Full award

On Tuesday, the government fully awarded its original 10-year bond offering as client demand soared amid a stable inflation outlook.

During the auction, the government sold P9-billion worth of 10-year bonds with a coupon rate of 6.5 percent.

The last time similar debt papers were auctioned off was on September 14 when the coupon rate stood at 6.125 percent, or 28.5 basis points lower than on Tuesday. Tenders for the said IOUs were more than three times oversubscribed at P32.349 billion.

“We had a good [auction] one again this week,” Tan said after the auction.

At the secondary market, done deals for similar debt papers fetched 6.48 percent.

Tan attributed the strong investor appetite to a more positive outlook with regard to inflation.

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