Gov’t debt hits new high of P14.35T

MANILA -The national government’s debt stock is not done climbing up, reaching a new high of P14.35 trillion at the end of August from P14.24 trillion at end-July, as the peso weakened against the US dollar, according to the Bureau of the Treasury (BTr).

The latest data on the government’s outstanding obligations came out as MSCI ESG & Climate Research said public debt ratios “may start to deteriorate in 2024” because this metric tends to increase the year following an occurrence of El Niño.

Data at the BTr show that of the total outstanding obligations, 68 percent or P9.79 trillion is owed to domestic lenders while 32 percent or P4.56 trillion is borrowed from foreign lenders.

Over the course of a month, domestic borrowings decreased by 0.2 percent or P21.24 billion as retail bonds matured.

Meanwhile, foreign debt increased by 2.9 percent or P126.52 billion mainly due to the depreciation of the Philippine peso, which thus increased the local currency value of the government’s debt stock.

READ: PH debt stock seen staying high over near term

Based on an estimate of the United Nations, the Philippine population is now 117.8 million. This suggests that each Filipino has a share of about P121,833 in the total debt.

61% of GDP

The BTr pegs the ratio of the Philippine government’s debt stock at 61 percent of the gross domestic product (GDP) as of the end of June. This is past the 60-percent threshold that is considered a prudent level of public debt.

Meanwhile, research done by United States-based capital market firm MSCI suggests that public-debt ratios may start to rise in 2024.

READ: PH plans to borrow P2.46T in 2024

MSCI said that higher food prices, already elevated from the COVID-19 supply-chain shock and Russia’s invasion of Ukraine, could be the start of a cascading trend for the global economy.

“Governments may increase relief spending to provide a safety net for citizens. Depending on the magnitude of impact, markets may need to ratchet up capital expenditure to repair damaged infrastructure,” MSCI said in a report penned by analysts Alex Schober and Cole Martin.

Impact of El Niño

They said that a combination of lower economic growth and higher fiscal expenditure could result in higher public-debt-to-GDP ratios for impacted sovereign issuers.

Citing advisories from the US Climate Prediction Center, MSCI noted that there was now a 95-percent probability that we would see an El Niño event during the 2023-2024 winter in the northern hemisphere, with forecasters anticipating it to be “strong.”

MSCI determined that the median debt-to-GDP increase for the years following an El Niño event was 0.6 percent of GDP globally and 2.1 percent for emerging markets—based on data between 1994 and 2021.

“Given the limitations of the historical analysis, we are curious to see whether developments during this period support our hypothesis that debt-to-GDP ratios rise in the year after an El Niño event,” the MSCI analysts said. INQ