Philippines ends 2020 with slimmer P9.795-T gov’t debt, 54.5% of GDP

The Philippines closed 2020 with a running debt balance of P9.795 trillion as of end-December 2020, lower from a month ago level, due to the settlement of several domestic loans.

Data released by the Bureau of the Treasury (BTr) showed the national government’s outstanding debt at end-December last year was 3.3% or P339.05 billion lower than the end-November 2020 level of P10.134 trillion.

The Treasury attributed the lower debt level “to net redemptions of domestic loans.”

In particular, the national government’s domestic debt stood at P6.69 trillion, down 6.9% “due to the repayment of the P540 billion provisional advances from BSP (Bangko Sentral ng Pilipinas.)”

To recall, the BSP’s Monetary Board approved in late December the government’s request of another P540 billion as budgetary support for efforts to address COVID-19. 

Domestic debt accounted for the lion’s share or 68.35% of the government’s total outstanding debt balance in 2020 “as the government continued its reliance on domestic borrowing to meet its financing needs.”

Foreign debt, meanwhile, amounted to P3.10 trillion, up 5.4% from the end-November level.

“For December, net foreign loan availment amounted to P151.43 billion including the newly issued ROP Bonds amounting to P132.06 billion ($2.75 billion) as part of continued government measures to raise funds for budgetary support while the appreciation in third-currency denominated debt added P10.67 billion to the peso value of external obligations,” the BTr said.

“On the other hand, peso appreciation trimmed P3.91 billion,” it said.

The Treasury noted that the peso appreciated against the US dollar to P48.021:$1 as of end-December 2020 from 48.085 as of end-November 2020.

In relation to the size of the economy, the national government debt-to-gross domestic product ratio ratio rose to 54.5% last year from 39.6% as of end-2019.

“This resulted from the higher financing requirement to address the pandemic alongside a 9.5% contraction in the economy for the year,” the Treasury said.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that many other countries in the Southeast Asian region as well as other developed countries around the world have much higher debt-to-GDP ratios than the Philippines, “some of these countries are already near 100% or even well above 100%.”

“Thus, the Philippines still has leeway to manage higher government spending and wider budget deficits largely for COVID-19 programs and also amid reduced government tax revenues due to COVID-19, while maintaining a delicate balance of having favorable credit ratings, as also seen by the affirmation on the country's credit ratings by Fitch on January 11, 2021,  Moody’s on July 16, 2020, and S&P on May 29, 2020 despite the economic and fiscal challenges largely brought about by the COVID-19 pandemic,” Ricafort said.

The Treasury said the national government’s debt stock in 2020 grew by P2.063 trillion or 26.7% compared to 2019’s P7.731 trillion due to “higher funding requirements to respond to the COVID-19 pandemic.” — BM, GMA News