Philippine gov’t debt soars to new high of ₱11.61T in July – treasury bureau


MANILA — The Philippine government outstanding loans as of end-July hit P11.61 trillion, published data from the Bureau of the Treasury showed.

In a statement, the treasury  bureau reported an outstanding debt stock of ₱11.61 trillion for the month, zooming past end-June’s ₱11.16-trillion tally. The latest figure is also a 26.7% climb from the ₱9.16-trillion tally in July 2020.

Domestic loans inched higher by 2.3% to ₱8.12 trillion on a month-on-month basis according to the Treasury, citing the net issuance of government securities.

Loans with foreign sources, meanwhile, climbed to ₱3.49 trillion, an 8.2% increase from end-June’s level.

“The net availment of foreign loans added ₱159.34 billion, including ₱146.17 billion from the issuance of USD Global Bonds,” the treasury bureau noted.

It also attributed the increase to the impact of local- and third-currency exchange fluctuations against the dollar worth ₱100.66 billion and ₱3.39 billion, respectively.

Meanwhile, guaranteed obligations grew by 1.3% from the previous month to ₱444.3 billion in July.

“The higher level of guaranteed debt was due to the impact of local- and third- currency exchange rate fluctuations against the US dollar amounting to ₱6.07 billion and ₱1.25 billion, respectively,” said the bureau, adding net repayments on both local and foreign guarantees offset ₱1.62 billion of the recent tally.

The Department of Finance has consistently assured that the country’s debt is manageable despite the increase, citing the need to borrow more as the pandemic is expected to continue hampering revenue collection.

Finance  Secretary Carlos Dominguez III  and Bangko Sentral Governor Benjamin Diokno attributed the government’s manageable debt service to prudent fiscal management despite the increase in financing requirements due to the pandemic.
“Primarily, our program is very manageable because it is very conservative. We only fund what is required,” he told members of the House Committee on Appropriations during the hearing for the proposed 2022 national budget, which was attended virtually by some stakeholders.
Government borrowing was set at around P3.07 trillion this year, while it is proposed to be around P2.47 trillion for next year.
Dominguez said while financing requirements increased because of the virus-induced pandemic, the government is “fortunate enough” to easily access funds at low cost because the economy kept its investment-grade credit rating.
“It has not been downgraded and that allows us to access (the) credit market at a relatively low interest rate,” he said.
To date, Moody’s Investors Service’s rating on the country is Baa2, a notch above minimum investment grade rating with a stable outlook, while it is ‘BBB’ with a negative outlook for Fitch Ratings and ‘BBB+’ with a stable outlook for S&P Global.
In his speech, Dominguez said the interest rate on borrowings by the government to date is 100 basis points lower than in the previous administration at 4.2 percent annually.
The government borrowed around P2.7 trillion in gross financing in 2020, and bulk or about 70 percent of this was sourced onshore.
The increased borrowings brought the share of the budget gap to gross domestic product (GDP) to 7.6 percent last year, nearly doubled from the previous year.
“Nevertheless, this level is still sustainable considering that we had to rapidly enlarge our health care capacity and procure sufficient doses of vaccines for our people,” Dominguez said.
He said governments around the world registered higher borrowings since last year because of the pandemic but what sets the Philippines apart “is that we entered 2020 with a historic low debt-to-GDP ratio of 39.6 percent.”
“This means that we could better absorb additional borrowings than other countries whose debt ratios were already at 60 percent before the pandemic,” he said, referring to the international threshold of debt-to-GDP.
The country’s debt-to-GDP rose to 60.4 percent as of end-June 2021, but credit raters still consider this manageable.
Dominguez said the bulk of the government’s fiscal resources is used for productive spending instead of debt servicing thus, the additional loans are “beneficial to economic development rather than a burden to growth.”
He also told lawmakers that the rise in government borrowings in recent years was due to higher investments in human capital and infrastructure.
“Now, deficit spending, provided that your return is better than the cost of your money, is a wise thing to do,” he added.