More loans, weak peso bloat debt stock further

The continued swelling of the Philippine national government’s debt stock has no end in sight yet as it reached a new record high of P13.52 trillion at the end of September, rising by 3.8 percent or P495.5 billion since the end of August.

Since June 30, when the Marcos administration took office, outstanding obligations have risen by P726.17 billion or by 5.7 percent from P12.79 trillion.

According to the Bureau of the Treasury, the latest level was buoyed by the depreciation of the Philippine peso and more borrowed funds to support the national budget.

In the nine months ending Sept. 30, the national government spent P1 trillion more than its revenues. This means that the budget deficit decreased by 11 percent from P1.14 trillion in the comparative nine months of 2021.

The government wants to limit the deficit to P1.3 trillion for the full-year 2022 in order to bring down the debt-to-GDP ratio below the 60-percent threshold for what is globally considered as “prudent.” This ratio was pegged at 62.1 percent as of the end of June.

Also, for the nine months, the debt stock increased by P1.79 trillion or 15.2 percent from P11.73 trillion.

Of the total outstanding obligations, 31 percent or P4.22 trillion is owed to foreign lenders while 69 percent or P9.3 trillion is borrowed from domestic lenders

“Since the beginning of the year, the domestic debt portfolio has increased by P1.13 trillion or 13.8 percent due to continued preference for domestic financing to mitigate the effects of currency fluctuations,” the bureau said.

These fluctuations—particularly the depreciation of the peso against the US dollar—raised the debt stock by P658.3 billion or 18.5 percent.

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the additional debt incurred in September was mainly from the issuance of P420.4 billion in retail Treasury bonds.

“The [debt stock] may have continued to increase after slower monthly increments in previous months due to some lumped borrowings with the need to hedge amid rising interest rates,” Ricafort said.

He added that yet another such frontloaded borrowing will add to the debt stock in October, which is the $2 billion or about P118 billion worth of US-dollar denominated bonds issued that month.