The Philippines’ top economic managers hosted a Financial Literacy Session (FLS) entitled, Invest and Manifest! on January 22, 2023 at the St. Ignatius Church, Frankfurt, Germany.
The FLS featured Finance Secretary Benjamin Diokno, Socioeconomic Planning Secretary Arsenio Balisacan, Budget Secretary Amenah Pangandaman, and Central Bank Governor Felipe Medalla as speakers.
Meanwhile, National Treasurer Rosalia V. de Leon and representatives from the Development Bank of the Philippines (DBP) and Land Bank of the Philippines announced the launch of the country’s second retail dollar bond (RDB) offering or RDB 2.
Secretary Diokno explained the rationale behind government borrowings, highlighted the country’s debt management strategy, and laid out the benefits of investing in government securities.
“To jumpstart the implementation of our development plan, the President has signed into law the 5.3 trillion-peso National Budget for 2023. Now, in order for the Philippines to have adequate fiscal resources on top of this budget for this year’s plans and programs, we need to raise 2.2 trillion pesos in borrowings,” he said.
According to Secretary Diokno, borrowings are necessary for the country to afford strategic and impactful investments in critical infrastructure and human capital development, which will ultimately advance economic productivity.
“[W]e are known internationally for being a responsible borrower,” said Secretary Diokno.
The Philippines’ debt management strategy prioritizes the domestic market at 75 percent of the total requirement, while 25 percent will come from external sources.
25 percent of the debt requirement is used to borrow from external sources, which mostly consist of loans with low interest rates and long repayment terms offered by development financial institutions like the World Bank (WB) and the Asian Development Bank (ADB).
Meanwhile, a greater portion of borrowings stem from the domestic market in order to protect the country against foreign exchange risk. This is because fluctuations in exchange rates run the risk of increasing debt service payments each time the peso depreciates.
Furthermore, domestic borrowings translate to investments for Filipinos. “Our debt becomes their investment, and our interest expense becomes their interest income. The benefits of domestic borrowing are all retained within the Philippine economy,” said Secretary Diokno.
Government securities are debt instruments or bonds issued by the Philippine government to the investing public in exchange for lending their money.
The government will issue periodic interest payments for the amount of time that the money is with the government and will return the full amount exactly on the maturity date.
Being under the obligation of the Republic of the Philippines, government securities are safe and widely accessible. These can be bought through online platforms using an existing Philippine current and savings account.
By investing in government securities, Filipinos have the opportunity to participate in nation building since proceeds will be used to fund key development programs and projects.
In closing, Secretary Diokno thanked the Filipinos in Germany for their overwhelming support for past government issuances, such as the retail treasury bonds.
“The Philippine government assures you that your investments will boost the Philippines’ long-term growth and reinforce the strength of our economy for generations to come,” he said.