Treasury data: Philippine gov’t debt swelled to fresh record-high, nearing P12T mark

The Philippine government’s running debt stock swelled to a new record-high and nearing the P12-trillion mark on the back of higher borrowings to boost state coffers amid the continuing COVID-19 pandemic, data released Wednesday by the Bureau of the Treasury (BTr) shows.

The national government’s outstanding debt hits a new-record-high of P11.97 trillion as of end-October 2021, ballooning by 19.38% from P10.027 trillion in the same period in 2020. pic.twitter.com/b5ItdWlz4z

— Ted Cordero (@Ted_Cordero) December 1, 2021

As of end-October this year, the national government’s outstanding debt reached P11.97 trillion, rising by 19.38% from P10.027 trillion as of end-October 2020.

The end-October 2021 debt level is also 0.46% higher than the end-September 2021 debt stock of P11.917 trillion.

Year-to-date, the total running debt balance rose by P2.2 trillion or by 22.22%.

The Treasury attributed the debt increase “due to the net issuance of domestic securities.”

The total debt stock is comprised mostly of domestic borrowings at 70.7%, while the remaining 29.3% were sourced externally.

Finance Secretary Carlos Dominguez III earlier defended the uptick in the country’s programmed debt, which is expected to hit the internationally recommended threshold of 60% proportion of gross domestic product by 2022. 

“I would like to emphasize again that the increase in our debt level is only temporary. It did not stem from profligate public spending, but rather resulted from a universal shock that deteriorated the financial positions of almost all countries around the world,” Dominguez told a House budget deliberation on the proposed P5.024 trillion national budget for 2022.

As of end-September this year, the amount of the country’s outstanding debt relative to the size of the economy has already breached the internationally-accepted debt threshold.

Data from the BTr showed that the country’s debt-to-gross domestic product (GDP) ratio grew to 63.1% as of end-September 2021 as the national government’s outstanding debt hit P11.917 trillion during the period.

This is the highest debt-to-GDP ratio in 16 years when the outstanding debt as percentage of the economy hit 65.7% in 2005.

Debt-to-GDP ratio

Senate Minority Leader Franklin Drilon has raised concerns on the 16-year high debt-to-GDP ratio since it “already breached the threshold marker that is accepted as [adequate] capacity of the economy to pay off its debts.” 

In response, Senate Committee on Finance chairman Senator Sonny Angara, defending the 2022 proposed budget, said that “in normal times, it's 60% debt as a percentage of GDP...”

“…but in abnormal times like now, the IMF (International Monetary Fund) has revised that figure to 70%. Most countries have now breached their predicted deficit levels.”

In particular, the government’s domestic debt stood at P8.47 trillion, up 0.96% from the end-September 2021 level of P8.4 trillion “as a result of the net issuance of government securities.”

Since the start of the year, the local debt has grown by P1.77 trillion or 26.49%.

External borrowings, meanwhile, amounted to P3.50 trillion, lower by 0.74% compared to end-September 2021’s level of P3.53 trillion due to the impact of local and foreign currency exchange rate adjustments amounting to P22.68 billion and P8.45 billion, respectively, according to the Treasury.

The BTr noted that the Philippine peso appreciated against the US dollar from P50.879:$1 as of end-September 2021 to P50.552:$1 as of end-October 2021.

It said that the currency rate adjustments more than offset the net availment of external obligations amounting to P4.96 billion.

Since the beginning of the year, the foreign borrowing grew by P402.81 billion or by 12.99%.

Fiscal consolidation plan

The Department of Finance (DOF) is pursuing a fiscal consolidation plan aimed at minimizing the long-term economic scarring resulting from the COVID-19 pandemic-induced recession. 

However, with less than a year before the Duterte administration steps down, the fiscal consolidation plan is for the next administration to implement.

Fiscal consolidation refers to government policies intended to reduce deficits and accumulation of debt.

“Tax revenue losses from the pandemic-induced economic slump, the rise in debt to fund our COVID-19 response, the looming revenue impact of our economic recovery measures, and lower spending efficiency as a result of the Supreme Court decision to expand the share of LGUs (local government units) from the NTA (National Tax Allotment) must be adequately addressed by the next administration’s economic team,” said Dominguez. — RSJ, GMA News