Gov’t debt burden breaches P10-T mark

The national government’s outstanding debt breached the P10-trillion mark for the first time in October mainly due to the renewed repurchase agreement which borrowed an even bigger amount from the central bank.

The latest Bureau of the Treasury data Friday showed that the end-October outstanding obligations amounted to P10.03 trillion, up 26.8 percent from P7.91 trillion a year ago and 7.03-percent bigger than the P9.37 trillion a month ago.

Domestic debt, which accounted for the bulk or 71.6 percent of the outstanding stock, rose 33.4 percent year-on-year and 9.9 percent month-on-month to P7.08 trillion.

In a statement, the Treasury attributed the increase in locally sourced obligations to the P540 billion in additional short-term borrowings from the Bangko Sentral ng Pilipinas (BSP) on top of a net issuance of treasury bills and bonds in October.

The BSP and the Treasury renewed their repurchase agreement after the initial P300-billion borrowing at the onset of the pandemic, at zero interest, was repaid in September.

Foreign debt, meanwhile, rose by a slower 13.4 percent year-on-year and 0.7 percent month-on-month to P2.95 trillion, or 28.4 percent of the total outstanding debt as of October.

The Treasury said the increase in external debt came on the back of a net of P18.9 billion in foreign loans plus P2.4 billion in forex losses as third currencies strengthened against the US dollar.

These offset the P1.6 billion in savings coming from a stronger peso, which closed October at 48.396:$1 from end-September’s 48.422 against the greenback.

In a text message on Friday, National Treasurer Rosalia de Leon said the borrowing program of P3 trillion for 2020 —nearly triple 2019’s P1.02 trillion—was unchanged during Thursday’s Development Budget Coordination Committee (DBCC) meeting.

In a presentation at an Asian Development Bank Institute forum also on Friday, De Leon said the 2020 gross financing target was “likely to be achieved behind strong demand for government securities.”

The Treasury said gross borrowings at the end of October stood at P2.84 trillion due to the unwinded repurchase agreement with the BSP in September.

Last Wednesday, the Philippines sold $2.75 billion in US dollar-denominated global bonds across two tenors at low yields, the proceeds of which will be spent for budgetary support, the Treasury had said.

De Leon said monetary and fiscal authorities in the Philippines have been closely coordinating to ensure financing of the government’s requirements.

The BSP’s series of interest rate and reserve requirement ratio cuts of late “shored up market confidence and ensured adequate liquidity and credit” while the central bank also complemented the national government’s programs through “extraordinary liquidity measures” like their repurchase agreement, De Leon said.

Despite rising borrowings, she said the slippage in debt indicators was minimal while the average interest rate was declining.

By year’s end, the DBCC projected outstanding debt to jump to P10.16 trillion from P7.73 trillion in 2019.

The Philippines’ debt-to-gross domestic product would also climb to 53.9 percent by end-2020 from a record-low of 39.6 percent last year.