November 25, 2017 | MANILA, PHILIPPINES

Gov’t mulls revival of OFW bonds

THE government is contemplating on floating retail dollar-denominated bonds targeted at overseas Filipinos, tapping what it described as uninvested dollar inflows to fund its ambitious infrastructure program, Budget Secretary Benjamin E. Diokno said on Friday.

It will be the first time for the Duterte administration to issue such bonds, potentially to be packaged as “infrastructure bonds”, although the Arroyo government in April 2010 employed a somewhat similar scheme -- multicurrency retail treasury bonds catering to OFWs to raise $346 million. Those bonds carried three-and five-year maturities.

“I’ve been thinking about that for a long time. You give it to the OFW, kasi diba padala sila ng padala [because they’ve kept sending money home]. But I think the option for them is to invest,” said Mr. Diokno on the sidelines of the BusinessWorld Economic Forum in Taguig on Friday.

Remittances have been a main driver of the economy -- manifested in retail spending -- and have been keeping the country’s balance of payments healthy.

Earlier this week, the central bank reported that remittances surged to a record high of $2.6 billion in March for an annual growth of 10.7%. The central bank expects remittances to grow by 4% this 2017, although new estimates could be announced this month. Cash remittances hit a record high of $26.9 billion last year, 5% higher than the $25.607-billion tally in 2015.

“Because the criticism is they do not invest, so why not invest in small denominated dollar bonds, tapos magiging parang [and then it will be like an] infrastructure bond,” Mr. Diokno said.

The Budget chief did not elaborate but he said the idea is that the offer would be similar to retail treasury bonds, but with Filipinos abroad as the market, and that the papers will be denominated in US dollars instead of the local currency.

“I think we can start having such fund. Infrastructure fund. You invest in your country, your country’s future,” Mr. Diokno said.

“Most of them (OFWs) have children, mga anak na pag-aaralin nila [children whom they need to provide education for] after five, 10 years. So that’s better, they can participate in nation building,” he added.

The Budget Secretary said that the offer should attract demand, with government bonds being a “riskless” investment, as investors see sustained confidence in the country signaled by the oversubscription of the recently issued 20-year Treasury bonds.

On May 16, the Treasury Bureau fully awarded the fresh bonds maturing in early May 2037, raising a total of P15 billion.

The Duterte administration plans to spend P8.4 trillion on infrastructure and social spending over the medium term in a bid to boost the economy at a 7-8% pace next year until 2022 from 6.9% in 2016, and slash poverty incidence to 13-15% from 21.6% in 2015.

In funding these infrastructure projects, the government programmed a “hybrid” financing scheme utilizing a mix of government funds, Official Development Assistance (ODA) loans, as well as public-private concessions.

But on Thursday, Malacañang said the Philippines has declined fresh aid from one of its biggest foreign aid donors -- the European Union -- arguing that the grants set conditions the Duterte government viewed as “interfering in internal affairs.” Mr. Diokno, while noting that economic managers were not informed of the decision, had said there are other funding options.

The government also borrows in the form of Treasury bonds and bills to fund maturing debts and plug the budget deficit. Government borrowings from the debt market are usually done by the Bureau of the Treasury although the entire financing program is a work of the interagency Development Budget Coordination Committee (DBCC) whose chairman is the Budget Secretary.