RATHER than use more than P12 billion in revenue-allotment funds directly, the various local government units (LGUs) opted to leverage what they have and securitize them instead, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

The process of securitization converts the internal-revenue allotment (IRA) into a debt instrument that the LGUs then sell and generate potentially far more money than if they use the funds directly.

A senior monetary official told reporters the monetary board, the policymaking body of the BSP, gave its seal of approval to the LGU securitization scheme just last week.

“The Development Bank of the Philippines had been tapped to manage the securitized allotment and then sell it,” according to the monetary official.

The official also said Budget Secretary Rolando Andaya extended a multiyear forward obligation and authority, or FOA, on the allotment that paved the way for its conversion into tradable securities.

An FOA signals the full faith and credit of government and proves the intent and capacity to pay for the obligation.

The securitization and subsequent monetary-board approval came in the wake of an earlier Malacañang decision authorizing the monetization of P12.57 billion worth of IRA that had been eyed for food productivity and food-security programs.

Both programs were seen to lift the country’s capacity to meet 98 percent of its rice requirements by 2010 and cut its rice import to the barest minimum.

Manila is estimated to import more or less 10 percent of its rice requirement from markets like Thailand and Vietnam, making it vulnerable to supply restrictions.

This year alone, some 17.3 million metric tons (MT) of rice were targeted for importation to stabilize prices.

The country is also expected to import 18 million MT next year and 19.3 million MT by 2010.

Manila needs to stabilize rice prices as the staple is a key element in the food component of the consumer price index that measures inflation.

The higher and more volatile the inflation, the more difficult monetary management becomes, the official said.

LGUs use leverage to maximize P12-B revenue-allotment fund

RATHER than use more than P12 billion in revenue-allotment funds directly, the various local government units (LGUs) opted to leverage what they have and securitize them instead, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

Metrobank taps personal finance, opens advice counter

METROPOLITAN Bank and Trust Co. (Metrobank) is tapping the personal finance advisory market by launching a wealth-management service catering to individuals who wish to have their personal finances assessed and customized to their needs.

A study of the investment intentions of companies outlines corporate direction

THE only certain thing about the shape of the global economy in the future is that it will be different from what it is today. “Global Corporate Capital Flows 2008/09 to 2013/14,” a survey from KPMG International, outlines some very clear indicators of possible future directions of corporate capital flows and raises some fundamental questions about what governments and corporations should consider.

BSP, DOF at logger heads over $500-M bond sale

FINANCE Secretary Margarito Teves now has authority to sell $500 million in foreign-currency bonds, but is reportedly reluctant to do so.

Prudential to pay crash victims $165M

IN the biggest aviation insurance settlement in the Philippines, and possibly in Asia, the Prudential Guarantee & Assurance Inc. (PGAI) has agreed to pay $165 million (P7.5 billion) to the families of those who perished in the crash of Air Philippines Flight 541 on Samal Island, Davao, some eight years ago.