The Philippines faces significant challenges in its bid to regain a spot in JPMorgan Chase & Co.’s prestigious Emerging Market Bond Index (EMBI) by 2025. The index is a key benchmark for tracking sovereign and quasi-sovereign bonds issued by emerging markets. According to National Treasurer Sharon P. Almanza, unresolved investor concerns may delay the country’s reentry.
Addressing Investor Concerns
Speaking to reporters on Monday, Almanza said, “We are trying to address all the issues that investors raise, which include liquidity and tax concerns.” She noted that the next review by JPMorgan is expected between the first and mid-second quarter of 2025, giving the government limited time to resolve these hurdles.
To address investor concerns, the Bureau of the Treasury (BTr) recently implemented a streamlined tax treaty procedure for nonresident investors in government securities. This initiative aims to tackle withholding tax issues that previously deterred foreign participation. The Philippines has existing tax treaties with major investment hubs, including the United States and the United Kingdom, which could provide a foundation for greater confidence among investors.
The Department of Finance (DoF) also held discussions last week with senior officials from JPMorgan to explore opportunities for collaboration. These talks focused on improving foreign investor access to peso-denominated government bonds, reducing transaction costs, and enhancing the country’s overall investment appeal. Inclusion in the EMBI is viewed as a critical step in achieving these objectives.
Recent Borrowing Activities
Despite missing out on the EMBI this year, the Philippine government has remained active in international debt markets. In 2024, the National Government raised $4.5 billion out of its $5-billion target through the issuance of US dollar-denominated global bonds. This included a $2-billion issuance in May and an additional $2.5 billion in August.
National Treasurer Almanza confirmed that the government’s commercial borrowing program for the year is nearing completion. “We’re close. We’re just finishing the program loans,” she said, emphasizing the focus on domestic funding sources in the coming years.
Balancing Domestic and Foreign Borrowing
For 2025 to 2027, the government plans to source 80% of its borrowing requirements from domestic markets, leaving 20% to foreign lenders. This strategy aligns with the administration’s goal of strengthening the local capital market while maintaining access to international funding.
JPMorgan’s EMBI inclusion would mark a significant milestone for the Philippines. It would enhance the visibility of peso-denominated government bonds, attract foreign investors, and reduce costs associated with international investments. However, the path to achieving this remains fraught with challenges.
Government Efforts to Boost Investment Confidence
The Finance Department views the EMBI reentry as a critical step in bolstering the country’s economic competitiveness. The DoF has highlighted the importance of addressing liquidity concerns and fostering partnerships with key financial institutions. During a recent meeting, Finance Secretary Ralph G. Recto emphasized the progress made in aligning Philippine securities with global standards.
As the country works to meet these benchmarks, the government’s streamlined tax procedures and proactive engagement with international financial players underscore its commitment to rejoining the EMBI.
Jaja has a degree in journalism and took classes in international law and business communication. Her career spans roles at prominent international media outlets, including International Business Times, Celebeat and Delightful Philippines. As a news editor, Jaja covered a wide range of beats, including legal, business, economy, cryptocurrency, personal finance, gaming, technology, and entertainment.