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Deficit forces early showing for global bond

The Philippines

President Gloria Macapagal Arroyo

On November 14 the Philippines' government announced that it would launch a global bond deal the next day. It wasn't what the market was expecting. Just a month earlier national treasurer Sergio Edeza had postponed until early 2003 the $1 billion bond deal that had been expected before the end of this year. He claimed that the country probably wouldn't need more funding for the rest of the year and could already finance shortfalls of up to P90 billion.

The new circumstance was yet another breach of the republic's fiscal deficit target. President Gloria Macapagal Arroyo's government revealed shortly before the snap call for the bond deal that the fiscal deficit for the first three quarters stood at P187.6 billion ($3.5 billion). The original year-end target of P130 billion was surpassed way back in July. The prediction now is that the fiscal shortfall could hit P233 billion (5.6% of GDP) by the end of the year.

Rating agency Fitch followed Standard & Poor's action last month and revised its outlook for the Philippines from stable to negative.