The Philippines’ outstanding obligations grew at almost the same pace as the economy last year such that the national government’s debt-to-gross domestic product (GDP) ratio slightly improved to 41.5 percent.
In a report on Wednesday, the Bureau of the Treasury said last year’s actual debt-to-GDP ratio was lower than the programmed 41.7 percent as well as 2018’s 41.9 percent
“The improved debt-to-GDP ratio is a result of prudent cash and debt management backed by steady economic growth,” the Treasury said.
The administration is planning to borrow more, but the administration programmed the debt-to-GDP ratio to further decline to 41.4 percent this year. It will try to sustain the downtrend, with the goal of hitting 38.6 percent before President Duterte steps down.
The debt stock by end-December last year totaled P7.73 trillion, up 0.3 percent from P7.71 trillion in November and 6-percent higher than P7.29 trillion at end-2018.
The year-on-year increase in the national government’s outstanding debt nearly matched the eight-year low 5.9-percent GDP growth posted in 2019.
On an annual basis, the end-2019 outstanding debt of the national government was the biggest ever; however, on a monthly basis, the highest thus far was August 2019’s P7.94 trillion.
Locally sourced debt, which accounted for two-thirds of total, rose 0.2 percent month-on-month and 7.3 percent year-on-year to P5.12 trillion.
The Treasury attributed this to “net issuance of government securities amounting to P11.96 billion and the P20-million effect of peso depreciation on onshore dollar bonds.”
In December, the Treasury sold P4.96 billion in “premyo” bonds to small investors, while the peso weakened to 50.802 from 50.758 versus the greenback last November.
The government prefers to source the bulk of its funding requirements locally to minimize foreign exchange risks.
Meanwhile, foreign debt increased 0.4 percent month-on-month and 3.5 percent year-on-year to P2.6 trillion.
“For December, the increase in external debt was due to the net availment of foreign loans amounting to P2.51 billion and the combined effect of local and third-currency fluctuations, which increased the value of foreign debt by P2.25 billion and P4.9 billion, respectively,” the Treasury explained.
For 2020, the Cabinet-level Development Budget Coordination Committee had set the borrowings program at a record P1.4 trillion. Thus, the national government’s outstanding debt was expected to reach a record-high P8.8 trillion by end-2020.
Of this year’s programmed borrowings, 75 percent or P1.05 trillion will be from domestic sources such as treasury bills and bonds.
This week, the Treasury started to sell retail treasury bonds at a coupon of 4.375 percent.
As for the P350-billion foreign borrowings planned for 2020, $3.5 billion will be commercial borrowings through debt paper issuance, while about $3 billion will come from program and project loans to be extended by bilateral development partners and multilateral lenders.
This month, the Philippines sold 1.2 billion euros in euro-denominated global bonds at record-low rates.