Gov’t outstanding debt balloons to record P9.6T as of end-August 2020

The national government’s running debt balance has swelled to a record P9.615 trillion as of end-August 2020 amid the state’s ramped up borrowing efforts to fund COVID-19 response and recovery measures, data from the Bureau of the Treasury (BTr) showed Wednesday.

The end-August outstanding debt is 21.1% higher compared to the P7.939 trillion debt balance recorded in the same period last year.

Month-on-month, the end-August debt stock is 4.9% wider than end-July’s P9.164 trillion “predominantly due to the net issuance of domestic debt securities,” according to the Treasury.

Compared to the end-December 2019 level of P7.731 trillion, the government outstanding debt during the period grew 24.4%.

The lion’s share of the total running debt balance or 69.8% were from domestic sources while the remaining 30.2% were sourced externally.

LOOK: The national government’s running debt balance reaches P9.615 trillion as of end-August 2020. | via @Ted_Cordero pic.twitter.com/0DPra4Zjcp

— GMA News (@gmanews) September 30, 2020

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the outstanding government debt of end-August 2020 has grown faster “amid increased government borrowings to fund various COVID-19 programs.”

To recall, Finance Secretary Carlos Dominguez III said the government will sustain its P3-trillion borrowing program for this year and in 2021 to augment funds for the costly COVID-19 response and recovery efforts.

For this year alone, gross borrowings will reach P3.003 trillion, the lion’s share of which or P2.218 trillion will be sourced locally while the balance P785.6 billion will be from foreign sources.

Budget and Expenditures and Sources of Financing for the fiscal year 2021 showed the government projects that the total outstanding debt for 2020 will amount to P10.16 trillion while for 2021 it is seen to reach P11.982 trillion.

The projected debt stock for 2020 is 31.42 % higher than the P7.73-trillion outstanding government debt at the end of 2019.

“The increase in the government’s debt remains sustainable in the coming years for as long as the debt-to-GDP ratio does not breach above 60%, which is considered an important minimum international threshold,” Ricafort said.

The Development Budget Coordination Committee earlier said the national government’s debt will be kept at a “sustainable and responsible level” or within the 60% internationally-recommended debt threshold.

“The Philippine debt-to-GDP ratio is expected to reach 50% levels from 2020-2022, from a little less than 40% of GDP in end-2019, still better/lower compared to similarly-rated countries/sovereigns,” Ricafort said.

Likewise, Security Bank chief economist Robert Dan Roces said that the debt is sustainable “in that the intent is for the country to be able to spend especially with the enactment of several pandemic response measures, and the sooner we are able to recover the sooner that the debt could be managed.”

“We observe that other countries in the region have accumulated higher debt, and our economic managers exercise extra prudence to be able to manage debt moving forward,” Roces said.

The country’s record gross international reserves (GIR) levels also allow the country to be able to meet its debt obligations, according to the Security Bank economist.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the GIR rose by $350 million to $98.95 billion from $98.6 billion in July.

“Thus, the Philippines still has leeway to manage wider budget deficits for COVID-19 programs while maintaining a delicate balance of having favorable credit ratings, as also seen by the affirmation by Moody’s and S&P despite the economic and fiscal challenges largely brought about by the COVID-19 pandemic,” Ricafort said.

Domestic debt

Of the outstanding debt of P9.615 trillion, the bulk 69.8% or P6.713 trillion are from domestic sources.

The government’s domestic stock is 27.3% higher than end August-2019’s P5.272 trillion and 7.3% wider than end-July 2020’s P6.256 trillion.

The Treasury attributed the higher domestic debt to the net issuance of domestic government securities.

For this year alone, domestic borrowing stood at P2.5 trillion, P925.38 billion of which were in Treasury Bills, P447.86 billion were in Treasury Bonds and P827.11 billion in Retail Treasury Bonds.

“This also includes the P300 billion short-term borrowing from the BSP through a repo (repurchase) agreement,” the BTr said.

Foreign debt

The government foreign debt, on the other hand, amounted to P2.902 trillion, 8.8% higher than P2.666 trillion as of end-August 2019.

On a month-on-month basis, however, the external debt balance during the period is slightly lower by 0.2% than end-July 2020’s P2.907 trillion.

“For August, the decline in external debt was attributed to the P37.36 billion net effect of local currency appreciation,” the BTr said.

The Treasury noted that the peso appreciated to P48.483 against the US dollar as of end-August from P49.114:$1 as of end-July.

For the period, project loan availment amounted to P17.09 billion while programs loans totaled P186.06 billion.—AOL, GMA News