DOF chief turns to small investors to plug deficit

Finance Secretary carlos G. Dominguez iii urged Filipinos to invest in the government’s domestic bond offerings to help the Duterte administration cover its budget deficits and help the ailing economy to recovery.

Citing the success of small investor-targeted “Premyo Bonds,” Dominguez said these products would also provide small savers a safe investment opportunity while protecting them from spurious business schemes and onerous lending practices.

“Investments in government bonds such as this one will help us cover our deficits brought about by the [public hea;th] emergency and prepare our economy for recovery,” the Department of Finance chief said. “Because of the fiscal discipline we have exercised over the past few years, the Philippine government found financial strength in the midst of a global health, and now economic, crisis.”

Dominguez issued these statements during the first two major Premyo Bonds raffle draws held Thursday afternoon at the main office of the Bureau of the Treasury (BTR) in Manila.

Budget deficit

DOMINGUEZ blamed the coronavirus disease 2019 (Covid-19) pandemic as bringing to bear on the national budget.

he said government had to scale up expenditures to strengthen the public health system and provide relief to the vulnerable sectors hardest hit by the lockdown to stem the contagion.

The country’s budget deficit this year is also expected by the government’s economic team to widen to 8.4 percent of gross domestic product or P1.613 trillion due to a drop in revenues and increase in disbursements. This is significantly wider compared to the country’s budget deficit of 3.4 percent of gross domestic product (GDP) or P660.2 billion.

The Development Budget Coordination Committee is expecting the country’s budget deficits for 2021 and 2022 to be at 6.6 percent of GDP or 1.429 trillion and 5 percent of GDP or P1.181 trillion, respectively.

A budget deficit occurs when disbursements exceed revenues.

A strong rebound

MOREOVER, the country’s finance chief also encouraged the lucky winners of the Premyo Bonds to use the money to start small businesses or reinvest in government bonds. Doing so, he added, would help fund the pandemic response measures and create new jobs to replace those that were lost from the economic fallout triggered by the 75-day lockdown.

“Investments that will lead to employment opportunities will be the key drivers in our economic recovery,” Dominguez said. “Let me assure you that this government is doing its best and its utmost to protect our people’s health while at the same time preparing our economy for a strong rebound.”

he noted that investments like Premyo bonds also expanded financial inclusion among Filipinos and improved the government’s borrowing mix in favor of domestic sources.

Dominguez, assisted by national Treasurer Rosalia V. De Leon, drew the winning electronic rewards numbers for the major prizes of the Premyo Bonds consolidated raffle draws.

The rewards include P20,000 each for 200 winners, P100,000 each for 30 winners and a house and lot for each of the two major winners of P1 million each. These rewards are net of all applicable taxes, fees and charges.

De Leon’s hope

FOR her part, De Leon said they are hoping to have more offerings of Premyo Bonds in the future.

“Seeing how Premyo Bonds support the government’s funding program and help Filipinos by giving an investment outlet that lets their money work for them even while staying at home, as well as the opportunity to win prizes, we hope this instrument will now be part of our ‘new normal’,” De Leon said. “Meaning, we hope to have more offerings of Premyo Bonds and be made more accessible to our kababayan [compatriot], taking advantage of the wonders of technology.”

The BTR increased the rewards pool from P3 million to P4.5 million after the overwhelming reception last year for the Premyo Bonds, which was offered last november 25 up to December 13.

That bond sale received wide participation after its launch among small savers and overseas Filipinos.

From the original target of P3 billion, the BTR was able to raise P4.961 billion from the one-year bonds, which carry a coupon rate of 3 percent per annum paid out per quarter, on top of having a chance to win cash and other rewards for just a minimum investment of P500 in Premyo Bonds.

Close to 20,000 new investors in the Premyo Bonds accounted for 77.56 percent or P3.85 billion of the amount raised from the offering. About 2,883 existing accounts made up 22.44 percent or P1.11 billion of the bond sale.

Succeeding draws

The draw for last year’s offering was originally scheduled in March this year. It was postponed because of the Luzon-wide enhanced community quarantine that was imposed to contain the spread of Covid-19.

The draws for the first and second quarters have been consolidated in the Thursday event.

Proceeds from Premyo Bonds, which are now part of the national government’s proactive financing strategy, will help fund the country’s health and educational programs, among other priority initiatives.

The Development Bank of the Philippines and Landbank of the Philippines were the joint lead issue managers for the first Premyo Bonds offering. BDO Capital & Investment Corp., China Bank Capital Corp. and First Metro Investment Corp. were named as joint issue managers.

The next Premyo Bond draws for this year are targeted to be held in September and December.