New loans push government debt stock to new peak in July

MANILA  -The Philippine national government’s debt stock increased by 0.7 percent or an additional P96.44 billion, to a new peak of P14.24 trillion at the end of July from P14.15 trillion at end-June, according to the Bureau of the Treasury.

The continued increase in outstanding obligations was again mainly due to new domestic borrowings exceeding payments made.

Of the total outstanding obligations, 69 percent or P9.81 trillion is borrowed from domestic lenders while 31 percent or P4.43 trillion is owed to foreign lenders.

Over the course of a month, domestic borrowings increased by 1.1 percent or P109.5 billion as the government issued more bonds than it redeemed.

Peso appreciation

At the same time, foreign debt decreased by 0.3 percent or P13.1 billion as gains from the appreciation of the Philippine peso in July offset the inflow of new borrowings.

The United Nation estimates that the Philippine population is now 117.34 million. This suggests that each Filipino has a share of about P112,400 in the total debt.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the new peak of the debt stock may be attributed to wider budget deficits amid high inflation that also bloated government expenditures, and higher interest rates that raised borrowing costs of the government.

“Tax and fiscal reform measures would help narrow the country’s budget deficit and also curb the increment in the outstanding national debt, going forward,” Ricafort said.

Above the threshold

As of the end of June, the debt stock represented 61 percent of the country’s gross domestic product (GDP).

This is just above the 60-percent threshold that is considered the maximum prudent level for a country’s borrowing profile.

In August, Budget Secretary Amenah Pangandaman said the debt-to-GDP ratio may not sink below the threshold in the next three years as the country has not yet fully emerged from the restrictive impact of the pandemic on production and consumption activities.

With the need to respond to the pandemic, the government was prompted to borrow heavily, bringing the debt ratio to 54.6 percent of GDP in 2020 and further to 60.4 percent in 2021.

Pangandaman also said that the debt level will not be going down until 2025 considering that the Marcos administration’s planned revenue measures have not yet kicked in.

Still, she said that the Marcos administration’s medium-term fiscal framework sets a goal of reducing the debt stock to 51 percent of GDP by 2028.