PH debt climbs to new high of P7.16 trillion in September

As the peso further fell to 13-year lows last month, the country’s outstanding debt inched up to a new high of P7.16 trillion as of September, the government reported Friday.

The national government’s obligations at the end of the first nine months rose 0.8 percent from P7.1 trillion a month ago and climbed 11.1 percent from P6.44 trillion a year ago, the latest Bureau of the Treasury data showed.

The bulk of debt or 64.1 percent of the total outstanding amount remained those sourced locally, which reached P4.59 trillion at end-September, up 0.3 percent month-on-month and 9.5 percent year-on-year.

“The [month-on-month] increase in domestic debt was due to the net issuance of government securities amounting to P14.54 billion and the depreciation of the peso that increased the value of onshore dollar bonds by P310 million,” the Treasury explained.

The Treasury noted that the peso weakened against the greenback to 54.102:$1 last month from 53.475:$1 in August.

The Cabinet-level interagency Development Budget Coordination Committee (DBCC) this month projected the peso-dollar exchange rate to average 52.5-53:$1 this year and 52-55:$1 starting next year until 2022, a higher range than the previous assumption of 50-53:$1.

The peso slid to 13-year low levels on the back of concerns on the widening deficit of the current account, a component of the country’s balance of payments.

At end-June, the current account deficit ballooned to $3.1 billion—equivalent to 1.9 percent of gross domestic product, from $133 million or only 0.1 percent of gross domestic product (GDP) a year ago, mainly on the back of an also wider trade-in-goods deficit as imports sustained strong growth while merchandise exports dropped.

Meanwhile, foreign debt also increased by a faster 1.6 percent month-on-month and jumped 14 percent year-on-year to P2.57 trillion in September.

“The increment in external debt was due to net availments of foreign loans amounting to P22.52 billion and the P29.68-billion impact of local currency depreciation against the US dollar. This was slightly offset by the net depreciation of third-currency denominated debt amounting to P11.13 billion,” the Treasury said.

Last Monday, Finance Secretary Carlos G. Dominguez III told the Senate finance committee that “with sustainable fiscal policy and prudent debt management, we expect the debt-to-GDP ratio to continue its downward trajectory path in the medium-term from 42.1 percent in 2017 to 38.6 percent in 2022.”

The debt-to-GDP ratio measures the share of the government’s outstanding obligations to the growing economy.

The latest Department of Finance data showed that the gross national government debt-to-GDP ratio as of June stood at 42.5 percent, the same as a year ago but slightly higher than end-2017.

“This will be supported by a financing program that will continue to favor domestic borrowings, following a 65:35 mix in 2018 and a 75:25 mix from 2019 to 2022. Our proactive liability management agenda has decreased the burden of debt on our budget, creating more fiscal space to fund social commitments,” Dominguez said.

For his part, Budget Secretary Benjamin E. Diokno told the 2018 Euromoney Philippines Investment Forum last week that the Philippine economy has a “sound” credit profile that “garnered the attention of credit rating agencies.”

“The credit profile of the Philippines has turned rosy. Its debt-to-GDP ratio is low and declining. Moreover, the bulk of our debt is owed domestically, about two-thirds domestic and one-third foreign, and will not mature any time soon,” according to Diokno.

The national government’s outstanding debt is expected to surpass the P8-trillion level next year as the Duterte administration will ramp up borrowings mainly to finance its ambitious “Build, Build, Build” infrastructure program.

The government had projected its debt to hit P7.331 trillion by yearend, up from P6.652 trillion at end-2017 and further climb to P8.116 trillion in 2019.  /muf