PH debt breaches P8-trillion mark in February

The national government debt breached the P8-trillion mark for the first time last February, driven by record-high amounts of retail treasury bonds (RTB) issued and redemption of euro bonds in the same month.

In a report on Friday (March 27), the Bureau of the Treasury said outstanding debt reached P8.17, 9.6-percent higher than the P7.45 trillion in 2019 and up 5.2 percent from January’s P7.76 trillion.

Two-thirds of the debt stock were from local sources as the government borrowed more from domestic sources to minimize foreign exchange risks.

End-February domestic debt rose 11.3 percent year-on-year and 6.4 percent month-on-month to P5.45 trillion.

The Treasury noted that it sold to small investors last February a record P310.8 billion in three-year RTBs at a coupon of 4.375 percent during the shortened, one-week offer period.

The latest RTB sale also included a P60.8-billion swap of IOUs maturing in April.

Foreign debt, meanwhile, increased 6.4 percent year-on-year and 2.9 percent month-on-month to P2.72 trillion.

The Treasury partly attributed the month-on-month increase in external debt to foreign currency rate fluctuations.

The peso weakened to 50.897 against the US dollar at end-February from 50.855:$1 in January, the Treasury noted.

The Treasury said it also redeemed $1.3 billion in three and nine-year euro bonds that were sold last January while the government borrowed $100 million from the World Bank.

For 2020, the Cabinet-level Development Budget Coordination Committee (DBCC) programmed a record P1.4 trillion in borrowing which could fling total national government deb to P8.8 trillion by end 2020.

Finance Secretary Carlos G. Dominguez III said last Wednesday that the government planned to borrow and get grants of up to $2 billion more from multilateral lenders to distribute cash aid to workers who lost their jobs in the government response to COVID-19.

Dominguez said the Philippines was “going to tap all markets” to ramp up financing for COVID-19 response since it still has debt capacity to do so.

When asked how much higher the Philippines could afford its debt level to rise since economic growth, as base, will also be impacted, Dominguez replied: “We are willing to do as much as it takes, but at this point I don’t have the exact number.”

Higher borrowings will also offset the estimated forgone tax revenues as COVID-19 took its toll on businesses and livelihood, which Dominguez had said would reach P286.4 billion if the Philippine economy posted zero growth this year, or a higher P318.9 billion if GDP contracted by 1 percent.

He acknowledged that credit rating agencies may not look kindly on more borrowings but that it was not the government’s main concern now.

“Our main concern now is no longer the credit rating agencies’ opinion of us, but the survival of our people,” Dominguez said.

Edited by TSB