COVID-19 impact: PH debt to hit P13.7T in Duterte’s last year in office

President Rodrigo Duterte will leave behind a record P13.7 trillion in debt when he steps down in 2022, elevating debt-to-GDP ratio to its highest in 17 years, as the government borrows more in the near-term to fight COVID-19 and revive the economy.

In a presentation to the House appropriations committee on Friday (Sept. 4) at the start of hearings for the proposed P4.5-trillion 2021 national budget, Finance Secretary Carlos G. Dominguez III said gross borrowings will reach over P3 trillion this year, P3.03 trillion in 2021 and P2.32 trillion in 2022.

Dominguez said the bulk of borrowings will be from local sources—74 percent of total this year, 85 percent in 2021 and 80 percent in 2022, as the domestic financial system was awash in cash.

As 2021 budget documents had shown, these borrowings will jack up the Philippines’ outstanding debt to new highs of P10.16 trillion by yearend and P11.98 trillion in 2021.

The ratio of debt as against GDP, or gross domestic product, which reflects ability to pay, will rise to 53.9 percent by end of this year, 58.1 percent in 2021 and 59.9 percent in 2022, when Duterte’s six-year term ends, according to Dominguez.

This meant that in 2022, the debt-to-GDP ratio will hit a 17-year high, the most elevated rate since 2005’s 65.7 percent.

These increases in debt-to-GDP ratio in the next three years will offset the gradual decline in the past decade to a record-low of 39.6 percent in 2019.

At an estimated nominal GDP of P22.35 trillion to P23.29 trillion in 2022, the amount of outstanding debt would be between P13.39 trillion and P13.95 trillion.

Asked by the Inquirer on Friday if these calculations were similar with the government’s projections, National Treasurer Rosalia V. de Leon replied that outstanding debt will be within that range, or about P13.7 trillion.

Dominguez nonetheless said the projected debt-to-GDP ratios in 2020 to 2022 were “still lower when compared to the country’s all-time high debt level of 71.6 percent of GDP in 2004.”

Dominguez said that as of Aug. 27, the Philippines, through the Department of Finance (DOF), already borrowed $8.83 billion from bilateral development partners, multilateral lenders and offshore commercial market. The loans were for the fight against the health and socioeconomic crises inflicted by the COVID-19 pandemic.

Dominguez said of the total loans, $5.98 billion is “budget support financing” from these sources:

• Asian Development Bank
• World Bank
• Asian Infrastructure Investment Bank, a development agency of France
• Japan International Cooperation Agency

He said at least $2.35 billion was raised from global bond offerings which “fetched our lowest-ever coupon in the US dollar market.”

At least $496.36 million was grant and loan financing “from our development partners for various COVID-19-specific projects.”

TSB