Weak peso propels outstanding PH debt to record P6.73T in January

As the peso weakened at the start of the year, the government’s outstanding obligations further rose to a record P6.73 trillion in January.

The national government’s outstanding debt as of January inched up 1.1 percent from P6.65 trillion at end-December 2017, as it also jumped by a tenth from P6.12 trillion a year ago, the latest Bureau of Treasury data released Thursday night showed.

In a statement, the Treasury attributed the month-on-month increase in the debt stock mostly to “the impact of foreign currency fluctuations.”

Foreign debt by end-January 2018, for instance, amounted to P2.29 trillion – up 3.8 percent from December’s P2.21 trillion and 6.2 percent higher than the P2.16 trillion in the same month last year.

The hike in external debt, equivalent to 34.1 percent of the year-to-date debt portfolio, was mainly due to “peso depreciation and the impact of third-currency appreciation that raised the value of the US dollar and third currency-denominated indebtedness amounting to P61.21 billion and P6.78 billion, respectively,” the Treasury explained.

“These added to the net availments on foreign loans for the month amounting to P16.15 billion,” according to the Treasury.

At end-January, the peso weakened to 51.341:$1 from end-2017’s 49.958:$1.

In the case of locally sourced debt, which accounted for 65.9 percent of the total, the amount declined 0.2 percent to P4.43 trillion in January from P4.44 trillion a month ago.

The Treasury said that the “reduced level of domestic debt were due to net redemption of government securities amounting to P11.17 billion.”

However, peso depreciation partially tempered the month-on-month drop in debt owed to domestic creditors, as the value of onshore dollar bonds increased by P700 million, the Treasury added.

The weakness of the Philippine peso against the US dollar was primarily because of market concerns on the prevailing current account deficit amid a surge in imports that also resulted in a wider trade deficit.

A component of the balance of payments, the current account was expected to have had swung to a $100-million deficit in 2017 from the $600-million surplus in 2016 amid the government’s push to ramp up infrastructure investments leading to strong capital goods importation.

This year, the current account deficit is seen swelling to $700 million.

In 2017, imports climbed 10.2 percent to $92.7 billion, outpacing the 9.5 percent growth in exports to $62.9 billion, resulting in a record trade-in-goods deficit of $29.8 billion.

Economic managers had said that as the Duterte administration embarks on its ambitious “Build, Build, Build” infrastructure program alongside expectations of sustained economic growth, demand for imports will remain robust in the near term.

Under “Build, Build, Build,” the government plans to rollout 75 flagship, “game-changing” projects, with about half targeted to be finished within President Rodrigo Duterte’s term, alongside spending a total of over P8 trillion on hard and modern infrastructure until 2022 to usher in “the golden age of infrastructure” after years of neglect.                                      /kga