Gov’t eyes debt swaps to arrest short-term payment buildup
The government plans to roll out a regular debt swap program aimed at spreading out the repayment schedule of its borrowings, which have been piling up in the short term and could strain public finances.
In a recent chat with reporters, National Treasurer Sharon Almanza said the Bureau of the Treasury (BTr) was finalizing the plan and preparing its systems to handle routine debt switch transactions.
In the meantime, Almanza said the BTr was in talks with banks to launch a swap program “within the year or even next.”
This would follow a similar offer made alongside this month’s retail Treasury bond (RTB) sale, which allowed holders of maturing securities to exchange them for the new RTBs.
“If you see our maturity profile, there’s really a concentration in the first five years, first three years. But we can also do liability management exercises,” Almanza said.
Under a debt swap, the government invites holders of bonds nearing maturity to exchange them for longer-dated securities. This helps extend the average maturity of state debt, giving the government more time to settle obligations and freeing up resources for public projects and much-needed social protection programs.
The government normally seeks the Bangko Sentral ng Pilipinas’ opinion every time it intends to borrow in peso terms or engage in activities, such as a debt swap, involving peso-denominated liabilities. This is to help the central bank manage the amount of cash circulating in the economy.
Investors may opt to participate in the swap if they want to extend their investments and potentially earn more interest.
However, Almanza noted that global uncertainties—such as tensions in US trade policy—have been driving demand for shorter-dated securities, making it harder to lengthen debt maturities.
“Given the uncertainty, investors usually don’t want to lock in or invest in very long-duration bonds,” she said.
“So, demand really is on the belly of the curve,” she added.
