PH debt to hit record P13.41 trillion in year Duterte steps down
MANILA, Philippines—The national government’s outstanding debt will hit a record-high P13.41 trillion by end of 2022 as the Department of Finance (DOF) on Friday (July 9) said the recent borrowing spree would finance the prolonged fight against the health and socioeconomic catastrophe inflicted by COVID-19.
Despite debt building up across emerging markets, UK-based Oxford Economics said in a report that the Philippines, Colombia, India and Malaysia “have the most fiscal space; their existing plans (as calibrated by the International Monetary Fund) entail primary balances well above those necessary to stabilize debt.”
“Existing fiscal plans, if implemented, would be more than sufficient to stabilize debt-to-GDP [gross domestic product] at 2021 levels in Chile, Colombia, India, Indonesia, Malaysia, Mexico, the Philippines, Russia, and Thailand,” said Tianchen Peng, Oxford Economics’ head of emerging market macro research, in a report last July 8.
The Philippines’ debt-to-GDP ratio—a metric which credit-rating agencies watch as this reflected an economy’s capacity to pay—climbed to a 16-year high of 60.4 percent at the end of the first quarter of 2021 as the government ramped up borrowings while the pandemic-induced recession spilled over to that period.
The end-March debt-to-GDP level breached what debt watchers considered as the manageable public debt threshold of 60 percent, but Finance Secretary Carlos Dominguez III last May said the end-2021 ratio will be equivalent to 58.7 percent of GDP, higher than 54.6 percent in 2021 and the record-low 39.6 percent in 2019.
According to a DOF infographic, outstanding debt will reach P11.55 trillion by yearend, up from P9.79 trillion in end-2020. Total gross borrowings in 2021 will rise to P3.03 trillion from P2.65 trillion in 2020 and ease to P2.64 trillion in 2022.
Citing estimates by the Bureau of the Treasury, the DOF said that had COVID-19 not happened, outstanding debt levels should have been lower–P8.59 trillion in end-2020, P9.35 trillion in end-2021 and P10.17 trillion in end-2022.
However, the COVID-19 crisis entailed filling the war chest against the pandemic, hence bigger borrowings than levels programmed by the government pre-pandemic amounting to only P1.4 trillion for 2020, P1.39 trillion for 2021 and P1.37 trillion for 2022.
The DOF said the larger borrowings for 2020, for instance, will finance public infrastructure spending worth P989.28 billion, expenditures on social services amounting to P1.49 trillion plus P492.59 billion in COVID-19 response measures.
The DOF also noted that the cost of borrowing measured by the weighted average interest rate (WAIR) declined to 4.17 percent in 2020 compared to 4.99 percent at the start of the Duterte administration in 2016.
“Our prudent debt management gave us the fiscal headroom to deal with the pandemic. The anticipated temporary rise in debt remains within the prescribed bounds of fiscal viability,” Dominguez said.
“Rest assured that we continue to exercise prudence in managing our fiscal affairs. We will protect our fiscal sustainability and ensure we have an ample war chest for this long battle,” Dominguez added.
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