PH gov't debt balloons to new record P13.75T as of end-February

The Philippine government’s running debt balance swelled to a new record high as of the end of February 2023 on the back of increased fundraising efforts through the domestic debt market, the Bureau of the Treasury (BTr) reported Thursday.

Treasury data showed the end-February outstanding debt stood at p13,75 trillion, up 0.4% from P13.7 trillion as of end-January.

The BTr said the higher debt stock during the period was “primarily due to the net issuance of domestic securities.”

In a commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the wider debt balance was in view of the issuance of P288.711-billion 5.5-year Retail Treasury Bond in February.

“The latest net borrowings of the national government may reflect the need to finance the budget deficits in recent months, also partly due to higher prices/inflation that also fundamentally increased/bloated government expenditures, higher interest rates/financing costs that added to the government’s debt servicing costs, still relatively weaker peso exchange rate vs. the US dollar compared to a year ago that increased the peso equivalent of the national government’s outstanding debts,” Ricafort said.

The lion’s share of the total debt pile or 68.7% was sourced from domestic borrowings while 31.3% was sourced externally.

In particular, domestic debt totaled P9.44 trillion, up 0.6% from P9.38 trillion as of end-January “due to the net availment of domestic financing amounting to P55.88 billion and the P1.34 billion effect of local currency depreciation against the US dollar on onshore foreign denominated securities.”

Foreign debt, meanwhile, amounted to P4.31 trillion, down 0.1% from P4.313 trillion month-on-month.

The Treasury said the lower foreign borrowings during the period was due to the P21.15 billion net repayment of foreign loans and P32.32 billion impact of third-currency adjustments against the US dollar.

“These outweighed the effect of local currency depreciation against the US dollar, which amounted to P50.51 billion. Compared to the end of December 2022, the country's external debt has increased by P100.12 billion or 2.4%,” it said.

Ricafort said that the faster growth in the economy, together with tax and other fiscal reform measures to help further increase structurally tax revenue and other revenue collections of the government, combined with more disciplined government spending, would help further reduce or improve the debt-to-GDP ratio to below the 60% international threshold to help sustain the country’s favorable credit ratings at 1-3 notches above the minimum investment grade.

As of end-2022, the debt-to-GDP ratio, or the government’s debt stock relative to the size of the economy, eased to 60.9% from 63.7% as of the third quarter of 2022, which was the highest since 2005.

The government aims to bring down the debt-to-GDP ratio to less than 60% by 2025 and further shrink it to 51.1% by 2028, as well as reduce the deficit-to-GDP ratio to 3% by 2028 and maintain infrastructure spending at 5% to 6% of GDP annually.

Prior to the COVID-19 pandemic, the Philippines’ debt-to-GDP ratio reached a record low of 39.6% in 2019. —KBK, GMA Integrated News