Gov’t debt hits record high of P15.35T

Government debt hit a new record high of P15.35 trillion at the end of May, mainly due to the weakening of the local currency against the greenback, the Bureau of the Treasury (BTr) said on Thursday.

BTr data showed that total state obligations increased by P330.39 billion in May, or by 2.2 percent from the previous month. Compared with a year ago, the debt load went up by 8.4 percent, or an additional P1.193 trillion debt in May.

The BTr attributed the higher debt to “the impact of local currency depreciation on the valuation of foreign-currency denominated debt.”

READ: Gov’t debt inches up to P15.35T in May

The peso weakened by 94 centavos to 58.52 against the US dollar as of end-May from 57.58 seen in end-April.

Since the beginning of the year, total liabilities have increased by P731.33 billion or 5 percent.

Domestic borrowings, which accounted for 68.04 percent of the total debt, rose by 1.3 percent to P10.44 trillion in May. The increase came from the P131.66 billion net issuance of government securities and the P2.68 billion effect of peso depreciation on foreign-currency denominated domestic debt. These resulted in an increase of 4.2 percent or P424.91 billion since the start of the year.

Meanwhile, it also went up by 8.9 percent or P424.91 billion compared to the same period last year. Outstanding external debts saw an increase of P196.04 billion or 4.2 percent which amounted to P4.90 trillion in May. The additional liabilities were driven by P122.04-billion worth of net foreign loan availability and P76.94 billion in upward revaluation of dollar-denominated debt.

The government plans to borrow P2.57 trillion this year to meet its planned expenses.

“Tax and fiscal reform measures would be realistically needed to bring down the country’s debt-to-gross domestic product (GDP) ratio to below the 60 percent international threshold to help sustain the country’s relatively favorable credit ratings of 1-3 notches above the minimum investment grade as consistently maintained since the pandemic,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp. said.

During its latest meeting, the Development Budget Coordination Committee set the debt-to-GDP ratio at 60.6 percent this year, slightly above the 60 percent that lenders deem manageable for developing economies.