Gov’t readies benchmark dollar, euro bonds offering

The Philippine government is preparing to offer US dollar and euro bonds as part of its fundraising program in the second half of 2024.

Fitch Ratings, one of the three major debt watchers, said it assigned the proposed US dollar and euro bonds a ‘BBB’ rating.

It said the rating is in line with the country’s ‘BBB’ long-term foreign-currency issuer default rating (IDR), which has a stable outlook and was last affirmed on June 7, 2024.

S&P Global Ratings assigned ‘BBB+’ long-term foreign currency issue rating to the benchmark-sized senior unsecured bonds that the Philippines proposes to issue.

The bonds represent direct, general, unconditional, unsecured and unsubordinated obligations of the government and rank equally with the sovereign’s other unsecured and unsubordinated debt obligations, S&P Global said.

Moody’s Ratings said the dollar bonds include tranches maturing in 2030, 2035 and 2049. It said the proceeds would be used for general purposes including budgetary support. A portion of the tranche maturing in 2049 will be used for eligible projects under the Sustainable Finance Framework, it said.

Fitch earlier said the ‘BBB’ rating and stable outlook reflect the Philippines’ strong medium-term growth, which supports a gradual reduction in government debt/GDP over the medium term and the large size of the economy relative to ‘BBB’ peers.

It expects the Philippine economy to expand by 5.8 percent in 2024, after 5.5 percent in 2023 and 7.6 percent in 2022.

“We forecast real GDP growth of above 6 percent over the medium term, considerably stronger than the ‘BBB’ median of 3 percent, supported by large investments in infrastructure and reforms to foster trade and investment, including public-private partnerships,” Fitch said.

Fitch said the general government (GG) deficit is also expected to narrow to 3.8 percent of gross domestic product by 2025, after 5.0 percent in 2023 and 5.4 percent of GDP in 2022.

This is consistent with a narrowing of the budgetary central government (CG) deficit to 5.4 percent of GDP by 2025, from 6.2 percent of GDP in 2023 and 7.3 percent of GDP in 2022. The high deficits reflect the authorities’ focus on fostering economic growth and development.

Finance Secretary Ralph Recto earlier said the government was looking at issuing dollar, euro and yen-denominated bonds this year to diversify its financing program.

The government already issued $2 billion in global bonds from its $5-billion target this year.