Philippines to Consider Peso Borrowing to Damp Currency Gains

Oct. 25 (Bloomberg) -- The Philippines, which sold dollar- denominated debt three times this year, may turn to the domestic market to raise funds to help temper currency gains, Finance Secretary Gary Teves said.

“We are not ruling it out as one of the options” for future requirements, Teves told reporters in Manila. The central bank asked during a meeting “if we would consider” shifting to domestic borrowing if peso gains accelerate, he said late Oct 23.

The peso climbed to a nine-month high on Oct. 15, prompting the central bank to purchase dollars to slow the advance. The Philippines, which buys almost all its oil overseas and is the world’s biggest rice importer, has to balance requirements for a currency level that boosts exports and overseas remittances while curbing import costs.

The currency is “very volatile,” Teves said, after the peso last week posted its biggest weekly decline in four months.

The Philippines sold $1 billion of dollar-denominated bonds on Oct. 17, bringing total overseas sales this year to $3.25 billion to cover a record budget deficit.

The government could tap the domestic and overseas markets for future funding requirements, Governor Amando Tetangco said on Oct. 23.

“There is liquidity out there needing to find an appropriate home in terms of yield,” he said.

The Philippines plans next year to borrow about 475 billion pesos ($10 billion) from the domestic market while the remaining 28 percent of a 660 billion peso total debt plan may come in part from official development loans and $2 billion from overseas bond sales. The deficit is forecast to narrow to 233 billion pesos in 2010 from a projected 250 billion pesos in 2009.

The government may delay the sale of yen-denominated bonds to next year given its “comfortable” cash position, Teves said earlier on Oct. 23. The nation may sell more dollar bonds in the first quarter, Teves said Oct. 19.