Debt mart reforms to support dev’t push
PLANNED REFORMS designed to deepen the local debt market will support ambitious infrastructure spending targets of the current administration by providing fresh sources of funding for big-ticket projects, the central bank chief said.
“Our capital markets are poised to serve as an important source of funding in support of the national government’s resolve to shore up infrastructure. A well-functioning local currency debt market, therefore, is critical to the implementation of a sustainable market-oriented debt management strategy,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said in a speech before a group of financial market associations last week.
“This will promote financial stability by diversifying funding sources to support economic growth, and increase the availability of financial products.”
The BSP, together with the Department of Finance, the Bureau of the Treasury and the Securities and Exchange Commission bared a comprehensive blueprint of reforms designed to deepen and broaden access to the country’s debt market, and which are envisioned to be in place by early 2019.
Planned changes include increasing the volume of Treasury
bills offered on a regular basis in a “stable, predictable and transparent” manner.
State regulators also want to set up a system of obligations, rights and incentives for socalled “market-makers” who will provide guidance on rate bids at auctions of government- issued debt notes.
At present, the government conducts its fund-raising activities through the offering of Treasury bills and bonds every week.
However, volumes offered and tenders received for each tenor varies, with investors showing stronger preference for shortdated notes.
Regulators are also looking to set rules on derivatives and repo markets, create “reliable financial benchmarks” for valuation of debt instruments, establish a reliable yield curve, as well as introduce a repurchase program for banks and other financial players.
The changes are expected to free up additional liquidity for project finance as the government rolls out its P8.44-trillion infrastructure development agenda until 2022 in a bid to ease doing business in the country and thus prod economic growth to 7-8% annually up to 2022 from a targeted 6.5-7.5% this year, an actual 6.9% in 2016 and a 6.2% average in 2010-2015.
In a separate report, titled: ASEAN Top 150 Companies: Stabilization Of Credit Quality Does Not Equate Improvement, analysts at S& P Global Ratings cited the Philippines among the Southeast Asian markets with “active and liquid” local banking and capital markets, with debt of some of the country’s biggest conglomerates on the rise.
“Based on their sectoral exposure, we believe the countries likeliest to see credit quality deteriorating in the next 12 months are the Philippines and Thailand…” the report read.
“The balance sheet of the largest companies in the Philippines and Singapore had about 2x more leverage on aggregate than those in Indonesia.” —