Gov’t borrowed record P994.8B in 2019, says DOF

The national government borrowed a record P994.8 billion in 2019 mostly from domestic sources as foreign financing slightly declined, the Department of Finance (DOF) said on Wednesday (Feb. 5).

In a report to Finance Secretary Carlos G. Dominguez III, National Treasurer Rosalia V. de Leon said gross domestic borrowing in 2019 amounted to P693.8 billion, up from P594.5 billion in 2018, citing Bureau of the Treasury data.

Aside from selling T-bills and bonds, retail treasury bonds and smaller denomination “premyo” bonds for the first time to local investors, the Treasury also issued P185.7 billion in global bonds with dollar, euro, reniminbi and yen denomination.

Gross foreign borrowing reached P301 billion—P78.2 billion in programmed loans and P37.1 billion in project loans. It was down from 2018’s P303.1 billion.

Combined gross domestic and external borrowing in 2019 was 11 percent higher than the total P897.6 billion borrowed by the government in 2018.

In 2019, total borrowing was 70 percent domestic and 30 percent foreign. De Leon said this protected the country from “external risks while developing the local debt market.”

De Leon, quoted by the DOF, said it was a “proactive borrowing strategy”. It helped “secure tight pricing for our global bond issuances,” De Leon said, according to the DOF.

De Leon said debt papers were issued using the currencies of “top trading partners and in jurisdictions with abundant savings but low return opportunities.”

She said it helped preserve “the scarcity value of Philippine dollar bonds and the tightness of our sovereign issue spreads.”

“Regular bond issuances in multiple markets also pave the way for the Philippines’ increased reliance on global bonds at minimal cost adjustments,” De Leon said.

This was to prepare for diminished levels of official development assistance (ODA) as a result of the Philippines rising to “upper middle-income status, which is expected ahead of schedule,” De Leon added.

Once the Philippines gains upper middle-income economy status, as defined by the World Bank, the country would have only two more years, or until 2022, to borrow at preferential rates.

Upper middle-income status meant a per capita income of $3,956.

As a result of prudent borrowing, the share of national government debt to GDP eased to 41.59 percent in 2019 below the projected 41.72 percent and 2018’s 41.9 percent.

At end-2019, the total debt stock increased 6 percent to P7.73 trillion from P7.29 trillion in 2018.

The year-on-year increase in the national government’s outstanding debt almost matched the eight-year low 5.9-percent GDP growth in 2019.

On a yearly basis, the end-2019 outstanding debt of the national government was the largest ever.

For 2020, the Cabinet-level Development Budget Coordination Committee (DBCC) had programmed borrowings to hit a record P1.4 trillion, with a borrowing mix of 75-percent domestic and 25-percent external.

The national government’s outstanding debt was projected to reach a record-high P8.8 trillion by end-2020.

While jacking up its borrowing, the DBCC had programmed the debt-to-GDP ratio to further decline to 41.4 percent in 2020.

The government wanted to further bring down the share of debt to the economy to 38.6 percent by 2022 by sustaining strong GDP growth of 6.5-7.5 percent annually beginning in 2020.

Edited by TSB