Gov’t debt swells to P7.17T

As the national government continued to borrow heavily from domestic sources, its debt stock further ballooned to P7.17 trillion in October.

The national government’s outstanding obligations at the end of the first 10 months inched up 0.1 percent from P7.16 trillion as of September, but jumped 10.2 percent from P6.5 trillion a year ago.

Domestic debt, which accounted for the bulk or 64.5 percent of the total, rose 0.7 percent month-on-month and 9.6 percent year-on-year to P4.62 trillion.

In a statement, the Bureau of the Treasury attributed the month-on-month increase in locally sourced borrowings to “the net issuance of government securities amounting to P32.74 billion.”

To raise funds, the government sells treasury bills and bonds to domestic investors.

The higher local debt was nonetheless “slightly offset by the appreciation of the peso that decreased the value of onshore dollar bonds by P290 million,” the Treasury added, noting that the currency strengthened to 53.527 against the dollar in October from 54:102 in September.

Foreign debt, meanwhile, declined 0.9 percent month-on-month but climbed by a faster 11.5 percent year-on-year to P2.55 trillion.

“The [month-on-month] decline in external debt level was principally due to the P27.34-billion impact of the stronger peso and net repayment on foreign obligations amounting to P330 million. This was tempered by the net appreciation of third-currency denominated external debt amounting to P2.52 billion,” according to the Treasury.

At last month’s Sulong Pilipinas-Philippine Development Forum roadshow held in key cities nationwide, economic managers reiterated that the Philippines was not falling into a debt trap even as it was seeking more loans from China and Japan to finance its ambitious “Build, Build, Build” infrastructure program.

“We take great care that the funds we borrow are wisely used and produce sufficient economic benefits to make the debt service easier down the road. Let me reiterate, in the face of uninformed criticism, this administration is not about to allow the country to be drowned in debts to China. In all the financing agreements, we have made sure that the country got the best deals possible and that the cardinal tenets of fiscal discipline are carefully observed,” Finance Secretary Carlos Dominguez III said last week.

Budget Secretary Benjamin Diokno had been pointing out that the share of debt to the growing economy has been going down.

“The Philippines’ debt-to-gross domestic product (GDP) ratio is now only about 40 percent, while the usual rule of thumb is that 60 percent means an economy is in pretty good shape. In comparison, Japan’s current debt-to-GDP ratio is 250 percent, while that of USA is over 100 percent, and countries in Europe are over 100 percent,” Diokno told a forum last month.

From 42.1 percent last year and this year, the debt-to-GDP ratio was expected to decline to 41.7 percent in 2019, 40.7 percent in 2020, 39.6 percent in 2021 and 38.6 percent in 2022.

The Duterte administration had also programmed a borrowing mix with a “strong bias for domestic sources to minimize foreign exchange risk,” according to Diokno.