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Philippine gov’t debt balloons to new record-high P12.09T as of end-February

The Philippine government’s running debt stock ballooned further and reached a new record-high as of end-February this year on continued state borrowing efforts to finance COVID-19 recovery measures coupled with a weaker peso during the period, data released Thursday by the Bureau of the Treasury (BTr) shows.

Treasury data showed that the end-February national government outstanding debt amounted to P12.09 trillion, 0.5% or P63.828 billion higher than the P12.029 trillion recorded as of end-January.

The increase in the government’s total debt stock was due to “currency fluctuations and net financing from both local and external sources,” according to the BTr.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the new record-high outstanding debt was brought by “increased government borrowings to finance wider budget deficit.”

As of January, the government’s fiscal balance stood at a deficit of P23.4 billion, 66.30% wider than the P14.1-billion shortfall seen in the same month last year as growth in state spending surpassed gains in revenue collections.

Ricafort said the country is still reeling from the adverse economic impact of the pandemic since 2020 in terms of reduced tax revenue collections and increased government expenditures on various COVID programs and increased infrastructure spending to also stimulate the economy.

The government’s debt is composed mostly of domestic borrowings at 69.6%, while the balance of 30.4% was sourced externally.

Finance Secretary Carlos Dominguez earlier defended the uptick country’s programmed debt, which is expected to hit the internationally recommended threshold of 60% proportion of gross domestic product this year.

The Philippines ended 2021 with a debt-to-GDP ratio of 60.5%, slightly higher within the accepted sustainable threshold.

Dominguez earlier said the Department of Finance (DOF) is preparing its fiscal consolidation proposal which would likely involve tax hikes to repay the country’s increasing debt.

The Finance chief has also expressed willingness to sit down with all the presidential candidates to discuss how to manage the trillions of pesos in government debt the next presidency will inherit from the Duterte administration.

Domestic debt, meanwhile, stood at P8.41 trillion, P45.42 billion or 0.5% higher than the end-January level “primarily due to net issuance of domestic government securities amounting to P44.89 billion.”

External debt totaled P3.68 trillion, up by P18.41 billion or 0.5% from the previous month.

“For February, the increment in external debt was due to the impact of peso depreciation against the US dollar amounting to P17.91 billion and the net availment of external obligations amounting to P3.25 billion,” the Treasury said, noting that the local currency depreciated against the greenback from P51.135:$1 as end-January 2022 to P51.385:$1 as end-February 2022.

“These more than offset the P2.74 billion reduction caused by adjustments in other foreign currencies,” the BTr said.

Ricafort said government debt could still increase in view of the P457.8 billion Retail Treasury Bond issuance and the $2.25 billion global bonds issuance both for the month of March “to finance the budget deficit amid increased infrastructure spending especially before the March 25, 2022 ban on some public works and in preparation for the May 2022 elections.”

“However, measures to further re-open the economy towards greater normalcy such as the proposed nationwide Alert Level 1, resumption of in-person schooling, further boosting local and foreign tourism, among others, as also consistent with the government’s 10-point agenda as well as to mitigate the adverse economic effects of Russia’s invasion of Ukraine for more than a month already… would help further boost the government’s recurring tax revenue collections with increased economic activities and also help reduce the government’s expenditures for financial assistance and other COVID programs,” he added.—AOL, GMA News