Softer April inflation allowed the Bureau of the Treasury to award P15 billion in 35-day treasury bills at a lower rate on Tuesday, and it helped as much that the Philippines is in no risk of falling into any debt crisis amid the COVID-19 pandemic, according to London-based Capital Economics.
National Treasurer Rosalia de Leon said the five-week treasury bills were sold at 2.042 percent, “much lower” than the 2.714 percent that the debt paper fetched in last month’s auction. Tenders for the IOUs maturing on June 11, 2020, amounted to P73.252 billion, making the auction almost five times oversubscribed.
De Leon noted that since the headline inflation rate declined to 2.2 percent last month from 2.5 percent in March, there was more space provided to the Bangko Sentral ng Pilipinas to cut policy rates, which, in turn, would further pull down market rates for government securities.As such, the Treasury opened its tap facility window to sell another P15 billion of the 35-day T-bills.
On Monday, the Treasury sold via tap P10 billion more of 364-day IOUs at 2.945 percent to the 11 government securities eligible dealers-market makers, whose bids reached P31.705 billion.
Capital Economics senior Asia economist Gareth Leather said in a May 4 report titled “Time to worry about the rise in government debt?” that “government debt will increase sharply across the region this year.”“While Indonesia, India, the Philippines, Thailand, Vietnam and Malaysia do not face an imminent public debt crisis, national debt is likely to exceed 60 percent of GDP (gross domestic product) in most of these economies by the end of this year. Despite the prospect of weak demand, we think these countries will focus on bringing government debt down to more comfortable levels,” Capital Economics said.
“Some of the region’s fastest-growing economies, most notably the Philippines and Vietnam, should be able to ‘outgrow’ the problem,” Capital Economics added.
Last week, the Treasury said that since the Philippine Statistics Authority rebased GDP to year 2018 from 2000 previously, its nominal value rose 4.9 percent last year and lowered the 2019 debt-to-GDP ratio to 39.6 percent from 41.5 percent at base year 2000.
While the Philippines ramped up borrowings to finance COVID-19 response, De Leon said that the 2020 debt-to-GDP ratio using base year 2018 as base would rise to 44.95 percent, comparable to the earlier projection of the Cabinet-level Development Budget Coordination Committee of 46.7 percent using the year 2000 as base.Finance Secretary Carlos Dominguez III said that such a higher debt-to-GDP ratio would still remain “low” compared with the Philippines’ neighbors. INQ