PHL gov’t debt rises to P13.52 trillion; experts propose new taxes, fiscal reform measures

MANILA – The Philippine national government’s outstanding debt rose by 3.8 percent to record high of P13.52 trillion as of the end of September, newly released data from the Bureau of Treasury showed.

The treasury bureau blamed the increase to the peso depreciation against the US dollar and pandemic-related financing.

The report prompted an economist to state that new fiscal reform measures are needed to help address the rise in government liabilities.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort attributed the jump in government debt partly to the issuance of around P118 billion worth of United States dollar-denominated bonds and the impact of weakening of the local currency against the greenback.

Ricafort said with the rise in government debt since 2020 due mainly to the pandemic, the current government “may still need to further intensify tax revenue collections based on existing tax laws, come up with new taxes/tax reform measures, increase tax rates, among others, to further boost structural sources of government revenues.”

He said new taxes such as those for digital transactions “are based on principles of fairness.”

“New taxes and higher tax rates need to be fair, equitable, and progressive, especially targeted to those that can afford them or those from the higher income brackets or at least prevent adding burden to the poor, most vulnerable sectors, and/or those hit hard by the pandemic,” he added.

Aside from new measures that are targeted to increase government revenues, Ricafort said the administration also needs to “adopt more disciplined spending through fiscal reform measures such as right-sizing the government, anti-corruption/anti-leakage/anti-wastage measures” to help lessen the government’s budget gap and address its liabilities.

He said the intensified tax collections from existing tax laws may not be enough and would inevitably require new tax/fiscal reform measures to curb additional borrowings by the government.

“Thus, tax reform and other fiscal reform measures, alongside faster economic growth, for the coming months/years would help ease the national government’s debt-to-GDP (gross domestic product) ratio to below the international threshold of 60 percent in the coming years and would help maintain/support the country’s relatively favorable credit ratings of 1-3 notched above the minimum investment grade rating,” he said.

Total outstanding debt as if September was P495.54 billion higher compared to August’s P13.02 trillion, the treasury bureau said in a statement.

“NG’s total debt increased by P495.54 billion or 3.8% primarily due to peso depreciation against the US dollar and the net issuance of government securities to support the budget,” the bureau said.

Out of the total debt stock, 31.2 percent or P4.22 trillion were sourced externally while 68.6 percent or P9.30 trillion were domestic borrowings, government data showed.

“The increment in the level of external debt was due to the P179.69 billion impact of local currency depreciation against the USD. This was partially offset by the P30.62 billion effect of third-currency depreciation against the USD and net repayment amounting to P10.8 billion,” it said.

As of the end of August, the peso stood at P56.171 to $1 and P58.646 in September.

The peso dipped to a record low of P59 in October before easing to around the P58 to $1 level in recent weeks.

Analysts expect the inflow of remittances and business process outsourcing (BPO) receipts in the fourth quarter to temporarily support the peso.

However, the US Federal Reserve’s 75-basis point interest rate hike on Nov. 2 is seen to fuel the dollar rally that could result in further depreciation of other currencies including the peso. (Jeanne Michael Penaranda)