Philippine gov’t debt balloons to new record-high P13.517T as of end-September

The Philippine government debt pile swelled further to a new record high as of end-September this year, owing mostly to the weakening of the local currency, data from the Bureau of the Treasury (BTr) on Thursday showed.

JUST IN: The Philippine government running debt rises further to new record of P13.517 trillion, the Bureau of the Treasury reported. | @Ted_Cordero pic.twitter.com/VFBMcRRL97

— GMA News Breaking (@gmanewsbreaking) November 3, 2022

The government’s outstanding debt stood at P13.517 trillion, up 3.8% from P13.021 trillion as of end-August. 

The debt stock as of the end of September already surpassed the P13.4-trillion projected outstanding debt at the end of the year.

The Treasury said the month-on-month rise in the debt levels was “primarily due to peso depreciation against the US dollar and the net issuance of government securities to support the budget.”

Year-on-year, the running debt pile grew 13.4% from P11.917 trillion as of end-September 2021. Year-to-date, it rose by 15.2% from P11.728 trillion as of end-December 2021.

The total debt stock as of end-September was largely composed of local borrowings at 68.8% while the remaining 31.2% was sourced externally.

Local debt

The national government’s domestic debt totaled P9.3 trillion, up 4% from the end-August level of P8.943 trillion.

“For September, the increase in domestic debt resulted from the net issuance of government securities amounting to P352.09 billion and the P5.18 billion impact of local currency depreciation against the US dollar,” the BTr said, noting that the peso depreciated against the US dollar from P56.171:$1 as of end-August to P58.646:$1 as of end-September.

The Treasury said that since the beginning of the year, the government’s local debt portfolio has grown by P1.13 trillion or 13.8% “due to continued preference for domestic financing to mitigate the effects of currency fluctuations.”

Foreign debt

The government’s foreign borrowings, meanwhile, amounted to P4.22 trillion, up 3.4% from P4.078 trillion as of end-August.

“The increment in the level of external debt was due to the P179.69 billion impact of local currency depreciation against the US dollar,” the Treasury said.

“This was partially offset by the P30.62 billion effect of third-currency depreciation against the US dollar and net repayment amounting to P10.80 billion,” it added.

Year-to-date, the government’s external debt increased by P658.30 billion or 18.5% primarily “due to local- and third-currency fluctuations that increase the peso value of foreign denominated obligations.”

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the weaker peso exchange rate in recent months partly added to the peso equivalent of the country's US dollar-denominated foreign debts.

Ricafort added that since the start of 2022 the Philippine peso already weakened by about 15% against the US dollar.

The economist said that higher US and global interest rates would also increase the government's interest rate payments and could lead to more borrowings.

“The higher inflation could also increase the government's expenditures, widen the budget deficit, and, in turn, would lead to more government borrowings,” he said.

“The $2 billion (or equivalent to about P118 billion) global bond sale/issuance of the national government would lead to further increase in the outstanding debt for the month of October 2022,” he added.

To recall, the Philippine government has raised a total of $2 billion or around P117 billion by offering triple-tranche dollar-denominated bonds —marking the Marcos administration’s debut in the offshore debt market. 

Finance Secretary Benjamin Diokno has said the debt levels seen during the Duterte administration will no longer be seen in the current regime.

The previous administration embarked on a borrowing spree to boost state coffers to respond to the COVID-19 pandemic—providing cash aid to vulnerable sectors and procuring vaccines to immunize the population, among others—as it implemented hard lockdowns to control the spread of the disease, causing economic activity to contract, which affected state revenue collection.

Diokno earlier said the debt-to-GDP ratio would gradually decline to 61.8% this year, 61.3% by 2023, 60.6% by 2024, and 59.3% by 2025.

The debt level should drop to 52.5% by the time the Marcos presidency ends in 2028.

Before the pandemic, the country’s debt-to-GDP ratio hit a record low of 39.6%

As of the second quarter of the year, the country’s debt-to-gross domestic product (GDP) ratio — the amount of the state’s debt relative to the size of the economy — stood at 62.1%, which is a slight improvement from 63.5% as of the first quarter, albeit still above the internationally accepted “manageable” threshold of 60%. — RSJ, GMA News