PH debt climbs to P12.89 trillion by end of July

The national government’s outstanding debt inched closer to the P13-trillion mark, reaching a new high of P12.89 trillion in July due to additional local and foreign borrowings, aggravated by a weak peso.

The latest Bureau of the Treasury (BTr) data released on Saturday showed that outstanding obligations as of end-July rose 0.8 percent from P12.79 trillion in June, and climbed 11 percent from P11.61 trillion a year ago.

Finance Secretary Benjamin Diokno told legislators last month that the end-July debt pile was estimated by the Department of Finance (DOF) to be equivalent to 62.1 percent of gross domestic product (GDP).

The debt-to-GDP ratio is said to be the better measure of an economy’s capability to repay its obligations. Credit rating agencies considered the 60 percent public debt-to-GDP level as manageable among emerging markets like the Philippines.

The government expects debt-to-GDP to settle at 62 percent — a 17-year-high — by yearend, equivalent to a record P13.43 trillion in debts.

Domestic debts, which accounted for the bulk or 68.5 percent of total, increased 0.7 percent month-on-month and 8.8 percent year-on-year to P8.83 trillion.

In a statement, the BTr said borrowings raised from treasury bills and bonds minus maturities resulted in an additional P64.33 billion in locally sourced debts last July. The government borrows more from local creditors to temper foreign exchange risks while taking advantage of a liquid financial system.

The weaker peso also added P740 million to the domestic debt stock. The peso slid to 55.322:$1 in end-July from 54.97 versus the greenback last June.

External debts also rose 0.8 percent month-on-month and jumped 16.2 percent year-on-year to P4.06 trillion.

The BTr said the peso’s depreciation added P25.77 billion to foreign debt, while a net of P6 billion was borrowed from creditors overseas, including bilateral development partners and multilateral lenders offering concessional or low-interest loans.

Last Friday, the peso fell to an all-time low of P56.77 against the US dollar, hence likely further bloating debt figures.

While reaching another record high, separate BTr data breaking down these debts showed what government officials had described as still a “sustainable” composition of its outstanding obligations.

For instance, peso-denominated debt accounted for 68.3 percent of total, amounting to P8.8 trillion.

Also, the bulk of outstanding debts were debt securities issued by the government, with P11.07-trillion worth. Loans accounted for only P1.82 trillion.

By maturity, P8.77-trillion worth or 68 percent of total were long-term borrowings or maturing in over 10 years; P3.58 trillion (27.8 percent) were medium-term debts set to mature between one and 10 years; and over P537 billion (4.2 percent) in short-term debt maturing within less than one year.

As of end-July, the government borrowed P1.25 trillion, which was 45 percent lower than its borrowings a year ago.

Diokno earlier told legislators tackling the proposed P5.268-trillion 2023 national budget that the Philippines’ borrowing needs “will decline significantly, because I don’t think we’ll have another pandemic in the near future.”

The prolonged COVID-19 pandemic forced massive borrowings to beef up the government’s war chest in order to give away cash dole-outs to the most vulnerable sectors, as well as vaccinate the majority of the population for free.

Diokno had said it helped that the national government’s end-July revenue collection was above target, as the seven-month tax and non-tax take of P2.04 trillion was 6 percent bigger than the P1.92-trillion goal.

“Our improved collection performance rests on the back of increased economic activity due to the full reopening of the economy, complemented by a more digitalized bureaucracy,” Diokno had said.

“With these key enablers in place, we expect our revenue collection to reach our target of P3.3 trillion pesos this year. This is 10 percent higher than in 2021 and already surpassing the pre-pandemic level of P3.1 trillion,” according to Diokno.

Government revenues were estimated to reach P3.63 trillion, including P500 million from privatization, next year.

By 2023, the government will borrow a gross amount of P2.2 trillion, slightly lower than this year’s borrowings.

Next year’s borrowings will include P1.65 trillion to be sourced locally, of which P1.59 trillion will come from the issuance of fixed-rate treasury bonds, while a net of P54.1 billion will be funded by short-dated T-bills (P621.1 billion in gross issuance next year offset by P567-billion maturities).

Similar to this year, three-fourths of the government’s borrowings in 2023 will be raised from the domestic debt market to take advantage of a liquid financial system while tempering foreign exchange risks.

External borrowings will further go down to P553.5 billion next year.

Among the foreign borrowings programmed for next year included P219.2 billion from program loans and P69.3 billion from project loans extended by multilateral lenders and bilateral development partners, as well as P265 billion to be raised from offshore commercial bond issuances denominated in foreign currencies.

Citing a report from the DOF’s international finance group, budget documents said the government will avail of $2.84 billion in program loans from the Manila-based Asian Development Bank (ADB) next year (up from $2.57-billion worth this year); $836.2-million worth from the Washington-based World Bank (up from this year’s $740.5 million); $400 million from the Beijing-based Asian Infrastructure Investment Bank (AIIB) for the proposed support to post-COVID 19 business and employment recovery loan in the pipeline; plus $57.2-million worth of financing from the Agence Française de Développement’s (AFD), down from this year’s $286.1 million in loans.

In all, the Philippines will avail of $4.14-billion worth (about P219.2 billion) of low-interest, concessional loans next year, up from $3.86 billion (P200.9 billion) this year, and $3.38 billion (P166.1 billion) last year.

Despite slightly lower borrowings planned for next year, the national government’s outstanding debt will further climb to a new record-high of P14.63 trillion by the end of 2023, or President Ferdinand “Bongbong” Marcos Jr.’s administration’s first full-year in office.

Budget documents had also shown that the government will repay a record P1.6 trillion in debts next year — the highest yearly debt servicing on record — due to the massive borrowings that piled up amid the prolonged COVID-19 pandemic.

Next year’s debt servicing will be higher than the P1.26 trillion programmed to pay outstanding obligations this year.

In 2023, the government will repay P1.35 trillion in domestic debts (up from P1.02 trillion this year), plus P253.8 billion in foreign obligations (up from this year’s P240.1 billion).

Debt payments next year will be composed of a record P1.02 trillion in principal amortization (up from P751.1 billion this year), on top of P582.3 billion in interest payments (up from this year’s P512.6 billion).

READ: PH debt seen to hit new high of P14.63T  by end-2023