Gov’t debt paper hit record on borrowing binge
The value of outstanding debt securities issued by the government in the local market hit a record of P8.17 trillion in 2021 following the issuance of 5.5-year retail treasury bonds (RTBs) in December, according to the Bureau of the Treasury (BTr).
The latest data from the BTr on Wednesday showed that the face value of outstanding treasury bills and bonds as of end-December 2021 breached the P8-trillion mark for the first time as it climbed from P7.9 billion in November.
The Treasury’s end-2021 IOUs jumped from P6.69 billion at the end of 2020.
The government borrows from the domestic debt market mainly through the weekly T-bill and -bond auctions, plus larger issuances of RTBs and last year’s first-ever retail dollar bonds (RDB).
Amid the COVID-19 pandemic, the Bangko Sentral ng Pilipinas (BSP) has also been extending to the national government a zero-interest, short-term loan. Last December, the government repaid its P540-billion provisional advances from the BSP, and then borrowed a lower P300 billion this year.
Relying on local debt
The Philippines relies heavily on locally sourced debt more than foreign borrowings as the financial system remained awash in cash, while the government wanted to temper foreign exchange risks.
Data showed that outstanding T-bills further declined to P796.1 billion last month from end-November’s P852.1 billion. The volumes of the benchmark 91-, 182- and 364-day treasury bills all dropped to P111 billion, P174 billion and P511.1 billion, respectively, as the Treasury allowed securities to mature and downscaled December’s auction volumes in a bid to pull the debt-to-gross domestic product (GDP) ratio below 60 percent by year-end.
On the other hand, outstanding fixed-rate treasury bonds jumped to P7.37 trillion in end-December from P7.05 trillion in November even as the Treasury settled P360 billion worth of RTBs on Dec. 2.
The latest borrowings through RTBs—P330.5 billion in new money, plus P29.5 billion from the switch with two bond series maturing in early 2022—fetched a coupon rate of 4.625 percent when offered last November and pitched by the Treasury as an investment vehicle for small investors with extra cash during the Christmas holidays.
Proceeds from the government’s 26th overall and the Duterte administration’s ninth RTB issuance were injected into the national budget to finance economic recovery efforts from the pandemic-induced slump.
Outstanding retail bonds
As of end-2021, outstanding RTBs amounted to P2.79 trillion.
Outstanding bonds also included P252.5 billion in three-year; P477.8 billion in five-year; P908.9 billion in seven-year; and P966.5 billion in 10-year tenors.
The outstanding amount for 10-year agrarian reform bonds stood at P7.2 billion; P475.2 billion in 20-year; P235.9 billion in 25-year; and P97.1 billion from the $6.582-million Philippine Par Bond redenominated into 28.5 years.
Also outstanding were P1.1 trillion in benchmark bonds; P50 billion in 25-year CB-BoL T-bonds; P25.2 billion in onshore dollar T-bonds; and P81.2 billion in dual-tranched RDBs.
To recall, the Philippines’ debt-to-GDP hit a 16-year high of 63.1 percent as of end-September 2021, surpassing the 60-percent threshold that credit rating agencies deemed as a manageable level for emerging markets like the Philippines, as debt accumulation outpaced the revert to economic growth.
President Duterte’s economic managers had targeted to end 2021 with an annual debt-to-GDP ratio of 59.1 percent, which will be the highest since the 65.7 percent posted in 2005.
Private-sector economists had warned that ballooning debt may lead to a downgrade of the country’s investment-grade credit ratings, which currently make debt cheaper.