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Philippine gov’t debt swells to new record P13.64T as of end-October

The Philippine government’s running debt ballooned to a fresh record high as of end-October this year amid continued state borrowing to support its fiscal requirements, data from the Bureau of the Treasury (BTr) on Wednesday showed.

The end-October outstanding debt stood at P13.64 trillion, up 0.92% or by P123.92 billion from the end-September level of P13.517 trillion.

The Treasury said the month-on-month growth in the debt pile was “largely due to the net availment of both local and external loans.”

Since the end-December 2021, the running debt stock rose by P1.91 trillion or 16.31%.

The total debt stock as of end-October this year was largely composed of local borrowings at 68.58% while the remaining 31.42% was sourced externally.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the increase in debt level reflected the $2 billion global bond issuance of the national government that was added to the outstanding national government stock for the month of October.

To recall, the Philippine government has raised a total of $2 billion or around P117 billion by offering triple-tranche dollar-denominated bonds —marking the Marcos administration’s debut in the offshore debt market.

“The outstanding national government debt may have continued to increase on a month-on-month basis by P123.9 billion due to some front-loading or lumped borrowings amid the need to hedge amid rising US, global, and local interest rates,” Ricafort said.

Local debt

The national government’s domestic debt, which comprised the lion’s share of the total debt stock, amounted to P9.36 trillion as of end-October.

The local debt during the period grew by 0.59% or P54.58 billion from P9.3 trillion as of end-September.

“For October, the increment to domestic debt was primarily due to the net issuance of government securities amounting to P55.83 billion, while local currency appreciation against the US dollar trimmed P1.25 billion,” the BTr said, noting that the Philippine peso appreciated against the US dollar from P58.646:$1 as of end-September to P58.047:$1 as of end-October.

Since the start of the year, the government’s local debt rose by P1.18 trillion or 14.50% “due to continued preference for domestic financing to mitigate foreign currency risk.”

Foreign debt

The government’s foreign borrowings, meanwhile, stood at P4.28 trillion during the period, up 1.64% from P4.22 trillion as of end-September.

The increment in the external debt was due to the P118.71 billion net availment of foreign financing, according to the Treasury.

“This was partly offset by the favorable net impact of both local- and third-currency fluctuations against the US dollar amounting to P43.07 billion and P6.30 billion, respectively,” it added.

Year-to-date, the government external debt has increased by P727.65 billion or 20.45% primarily due to local- and third-currency fluctuations that increase the peso value of foreign denominated obligations, the BTr said.

As of the third quarter of the year, the country’s debt-to-gross domestic product (GDP) ratio — the amount of the state’s debt relative to the size of the economy — stood at a fresh 17-year high of 63.7%, the highest since 2005 when it hit 65.7%, and well above the internationally recommended threshold of 60%.

Finance Secretary Benjamin Diokno has said the debt levels seen during the Duterte administration will no longer be seen in the current regime.

Diokno also said the debt-to-GDP ratio would gradually decline to 61.8% this year, 61.3% by 2023, 60.6% by 2024, and 59.3% by 2025.

The debt level should drop to 52.5% by the time the Marcos presidency ends in 2028.

Before the pandemic, the country’s debt-to-GDP ratio hit a record low of 39.6%.

The previous administration embarked on a borrowing spree to boost state coffers to respond to the COVID-19 pandemic—providing cash aid to vulnerable sectors and procuring vaccines to immunize the population, among others—as it implemented hard lockdowns to control the spread of the disease, causing economic activity to contract, which affected state revenue collection.—AOL, GMA Integrated News