Thailand
Philippines: DOF expects higher borrowing costs
MANILA, Philippines — The Department of Finance (DOF) expects borrowing costs to rise amid the escalating conflict between Russia and Ukraine.
Finance Secretary Carlos Dominguez said the government would depend its financing requirements from the P458 billion raised by the Bureau of the Treasury through the 27th tranche of Retail Treasury Bonds (RTBs).
“Following a strong RTB reception, the government is well positioned to meet disbursements despite Treasury’s rejections during auctions,” Dominguez said in a text message to reporters.
Last week the Treasury closed the public offer for the RTBs, raising P457.8 billion from mostly small-scale investors. The RTBs, which can be bought at a minimum bid of P5,000, fetched P120.8 billion during the rate setting and P337 billion during the two-week offer.
Moving forward, Dominguez said the government faces a dilemma on where to borrow as debt markets here and abroad demand higher interest rates.
He said the DOF would look into the bond market first before it pushes through with its maiden offering of $500 million in green bonds.
In a report to President Duterte, Dominguez said the Philippines may suffer indirect damage to commodity prices, borrowing costs, capital inflows and additional spending from the ongoing tensions between Ukraine and Russia.
On commodity prices, the country should anticipate a surge in global prices of wheat and corn, as Russia is the world’s largest exporter of wheat while Ukraine is the fourth largest for corn.
In the long run, European nations that used to procure from Russia and Ukraine will import from countries like China and the United States. If tensions extend any longer, world prices of wheat and corn are expected rise as demand will eventually overwhelm supply, according to analysts.
They also said the conflict may also amplify the risks of investments on top of the US Fed’s plan to push interest rates up to tame inflation.
Dominguez said the sanctions imposed by the West against Russia may force investors to hold off investment plans, which may negatively impact developing economies like the Philippines.
“All aforesaid economic impacts will likely require government support to protect our vulnerable citizens and the critical sectors most affected by the crisis, and this will stretch our budget even further,” Dominguez said.
Source: https://www.philstar.com/business/2022/03/09/2165897/dof-expects-higher-borrowing-costs