MANILA, Philippines—Government debt moved closer to the P12 trillion mark following the sale in October of at least P80.8 billion of its first ever retail dollar bonds and sustained domestic borrowings.
The latest Bureau of the Treasury data on Wednesday (Dec. 1) showed that total obligations inched up by 0.46 percent to P11.97 trillion as of October from P11.92 trillion in September. Year-on-year, the debt stock jumped 19.4 percent from over P10 trillion in end-October 2020.
Locally sourced debt rose 0.96 percent month-on-month and 19.7 percent year-on-year to P8.47 trillion. The Treasury attributed these increases to net issuance of government securities, which meant T-bills and bonds–including the dual tranched RDBs—that were sold in October exceeded maturities.
Domestic debt accounted for 71 percent of the end-October total, as the government relied more on local borrowings to take advantage of liquidity dumped into the economy by low interest rates while avoiding risks from fluctuating foreign exchange rates.
Treasury data showed that P8.45-trillion worth—or 71 percent—of outstanding debt was denominated in peso.
External debt declined 0.74 percent month-on-month to P3.5 trillion. But outstanding debt given by multilateral lenders and bilateral development partners to the Philippines climbed 18.7 percent from P2.95 trillion in 2020.
The Treasury said the stronger peso in October against September reduced foreign debt month-on-month by P31.13 billion. The peso ended October at 50.552 against the US dollar from 50.879 to a dollar in September.
Also, funds from foreign loans which flowed in October were a smaller net of P4.96 billion, the Treasury added.
In terms of debt instrument type, P9.9-trillion of the end-October debt pile were government securities and P2.07 trillion were concessional loans.
The bulk of outstanding loans will mature after over 10 years—P7.76 trillion or 64.8 percent of total had long-term maturity.
Medium-term debt—or one to 10-year maturities—amounted to P2.76 trillion or 23 percent of total, while short-term obligations maturing in less than a year reached P1.45 trillion, accounting for 12.1 percent.
As debt accumulation outpaced economic growth, the end-September debt-to-gross domestic product (GDP) ratio climbed to a 16-year high of 63.1 percent, above the 60-percent threshold deemed by credit rating agencies as manageable among emerging markets like the Philippines.
The Treasury slashed its domestic borrowings program for December to only P70 billion so that debt-to-GDP—which reflected capability to repay obligations—would end 2021 at the target 59.1-percent level, equivalent to P11.73 trillion.
Despite higher borrowings to add to the government’s war chest against COVID-19, Dominguez told foreign business chambers last week that judicious debt management being practiced even before the pandemic allowed the government to reduce public debt costs.
The latest Department of Finance (DOF) data showed that the Philippines borrowed a total of $22.58 billion—or P1.15 trillion—to date, to fight the health and socioeconomic crises inflicted by the prolonged COVID-19 pandemic.
“Our average annual interest rate on domestic and external debt has declined from 6.3 percent in 2010 to 3.9 percent in September 2021. This reflects the country’s success in maintaining good macroeconomic fundamentals,” Dominguez said.
Also, Dominguez said debt affordability remained “well-manageable” due to the declining share of interest payments to revenue collections as well as government expenditures.
For Dominguez, the current debt level “remains eminently sustainable.” “The stability of the peso indicates this.”
“We expect to begin working down our debt by next year,” he said.