By Clarissa Batino Aug. 14 (Bloomberg) -- The Philippines may sell about $2 billion of dollar and yen debt to plug its budget deficit in 2010, Treasurer Roberto Tan said in an interview today. “We have a lot of funding options available to us given that the emerging borrowing for next year is lower,” Tan said by telephone from Davao City, in southern Philippines. “We can pre-fund part of next year’s requirement by selling samurai bonds before year-end. Global bonds and official development loans are always there.” The $167 billion Southeast Asian economy is set for a record budget deficit this year and a shortfall in 2010 would be the 13th in a row. A slowing economy and lower tax revenue have prompted the government to issue more debt. The Philippines raised $750 million last month by selling U.S. currency bonds, adding to $2.25 billion sold earlier in the year. “We can do the samurai this year or next year,” Tan said. “There’s no rush.” The Philippines is in talks with 10 banks to sell yen-denominated debt in Japan, he said. “The overseas market offers flexibility for the government in case the domestic market becomes volatile ahead of the elections,” said Alex Macapagal, first vice president and head of treasury group at Land Bank of the Philippines in Manila. “The government must improve its fiscal performance to help manage funding costs.” Development Loans The government will likely borrow 475 billion pesos ($9.9 billion) from the domestic market next year, or about 72 percent of the total plan, Tan said. The remaining 28 percent, equivalent to about 185 billion pesos, may come in part from official development loans, the treasurer said. Total borrowings of about 660 billion pesos in 2010 will be unchanged from this year’s plan. At least $750 million in additional official development loans will boost government funding this year, Tan said. The yield on the 6.5 percent dollar bond maturing in January 2020, which the government sold last month, fell as low as 6.309 percent on Aug. 5. It was 6.317 percent as of 2:42 p.m. in Manila, according to data from ING Groep NV. The Philippines long-term foreign currency debt is rated BB- by Standard & Poor’s, three notches below investment grade. There are 10 investment-grade ratings. Growth in second-quarter agricultural output slowed, the Department of Agriculture said today, threatening an economy that expanded by the least in a decade in the first three months of the year. The sector employs more than a third of the Philippine workforce. The government predicts this year’s budget deficit will be a record 250 billion pesos, and Tan forecast the shortfall will narrow to 233.4 billion pesos in 2010. President Gloria Arroyo, who ends her term next year, will ask Congress for a budget of 1.54 trillion pesos for 2010. The nation will hold national elections in May 2010. To contact the reporters for this story: Clarissa Batino in Manila at cbatino@bloomberg.net.

Source