State-owned financial firms eyed for PPP

THE Aquino administration plans to tap state-run pension funds and financial institutions to raise money for its public-private partnership (PPP) initiative. During a Senate Committee on Finance hearing on Monday, Department of Finance (DOF) Secretary Cesar Purisima said they would turn to the Social Security System, Government Service Insurance System and other government financial institutions (GFI) as the main market for a fresh bond issuance aimed at raising money that will be relent to investors for infrastructure development.

He said GFIs would be tapped “because they need to match their [long] term liabilities with longer term assets. Hence, this move will be very much favorable for them.”

Purisima said the government would be the catalyst of the PPP by trying to create that pool of money in favor of the proponents.

“When we lend these funds, we would securitize these so that we can likewise replenish the funds that will be relent,” he said.

The DOF chief said the bonds would have tenors of up to 25 years, and would be re-lent to qualified contractors to jumpstart the government’s priority infrastructure projects next year.

In the same hearing, senators assailed the government’s move to reduce the country’s capital outlay for next year by P12.8 billion to P196.6 billion.

The lawmakers said the government was relying too much on private investors and dispensing with “vital” funding for capital outlay.

The government expects interest payments for the year to dip amid the low rate regime and a stronger peso.

For this year, the government provided for interest payments of P327 billion, but may end up paying only P314 billion or P13 billion less than programmed.

In the first half of the year, the government paid a total of P189 billion in interest on debts, or below the programmed P206 billion for the period.

Purisima said the government’s total debt service is projected to go up to P823 billion in 2011 from the current’s year P742.8 billion, including principal payments.

The Development and Budget Coordination Committee slashed P711 billion in automatic appropriations from the proposed 2011 national expenditure program.

“Debt servicing [as a percentage of the national budget] will continue to go down in the coming years but its absolute amount will continue to increase,” Purisima said.

Debt servicing as a percentage of the national budget next year would decline to 21.7 percent from the 23 percent set earlier.

The government debt stock is seen hitting P5 trillion at end-2011 as against the P4.7 trillion this year. –KATRINA MENNEN A. VALDEZ REPORTER, Manila Times